Gold Price: U.S. Dollar Weakens, Paving the Way for Gold

Friday, November 17, 2017

Over the past month or so, there has been a strong trend for the U.S. dollar. Holding onto late October increases, the U.S. dollar index repeatedly moved close to 95 points, which in turn helped keep the price of gold under the psychological $1300 per troy ounce barrier. But November has not been a strong month for the dollar.

US dollar marks chart

Source: MarketWatch.com

With the recent decreases, the U.S. dollar is moving towards its low points in the previous month, which could in turn pave the way for precious metals to make a strong move late in the year.

Stock Market Not Pricing in Tax Cuts?

With the Republican push for tax cuts late this year, there has been some optimism in the markets, with those in favor believing that the stock market is set to make major moves, should successful tax cut legislation ever pass. And many market analysts always look to see what the market has already “priced in”—which is to say, “baked into the recipe.” In these terms, the stock market’s expectations of a tax cut could push it higher, which would mean that failure to pass this legislation could spell a short-term dip for equities.

But now, analysts at UBS are watching the markets and don’t believe that there is that much optimism baked into the stock market price. Instead, they believe that the market is taking a wait-and-see approach, particularly with the failure to pass any major legislation on health care despite constant headlines in early 2017.

What does this mean for gold investors? It means that the picture for the stock market might not be as rosy as some initially believed. Instead, late 2017 could be susceptible to stock market volatility, particularly if the holidays aren’t as strong as many are expecting—or even hoping.

Gold Without Major Moves Despite U.S. Dollar Decrease

Although the U.S. dollar has seen a fairly sharp decrease in early November, the returns for gold aren’t as strong as some might expect. This lack of momentum out of gold suggests that there are still plenty of investors holding onto stocks and equities rather than moving to gold and other precious metals.

Right now, gold is playing relatively small games with the dollar—low rises here, low dips there. Nothing is too versatile yet. But there are plenty of headlines that could capture the attention of markets, particularly as we enter the holiday season.

Thursday’s Gold Position

As of this morning, gold is showing only modest gains—as little as a tenth of a percentage point in the green—without much volatility. The markets, on the other hand, are showing resilience to their recent losses, with the Dow Jones Industrial Average up over a hundred points.

Gold remains a viable alternative to the dollar, but despite the recent declines, gold has yet to move above $1,300 in response. Investors might see this as an opportunity, but there is plenty of 2017 left that could shift the financial tide and potentially change the situation in the gold price.

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Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.