Gold Prices: One Big Tug of War?

Summer is usually a quiet time in gold trading.  Most retail demand factors for gold happen in the Fall – such as the start of Indian marriage season – and Spring – end of Indian marriage season, and Asian New Year. But in the summer – nada. And that’s where we are now – in the middle of the “nothing” season.  So we can’t expect any news of a demand increase to lift gold prices out of their recent doldrums.

Yet at the same time, we’ve seen a tremendous run-up in the US Dollar.  Here’s the recent chart for UUP, an ETF that tracks the Dollar against a basket of currencies.

(credit Fidelity.com)

As you can see, the Dollar has had quite a surge the past few months. This put a lot of pressure on gold prices, as you might be painfully aware.

But now it looks like the Dollar has hit a local peak and has backed off a bit.  This has allowed gold prices to move back up into the 1265 range in early trading this morning.  And 1265, as we’ve discussed before, has been an important price for gold.

Over the weekend, news came out that Indian gold was trading at a premium again.  Finally. This is positive sign for gold prices, as it indicates consumers think gold is cheap right now.  It may indicate a floor for gold prices. Or it might just be a short-term pop.

If the Dollar keeps heading down, and if trade war tensions continue to pile up, we may well see gold break up through 1265 and head up toward 1300.  But without any retail demand to drive the price we are likely to see prices stall between 1265 and 1285. And in any case, 1300 will be a very tough nut to crack in the next few weeks.

Signed, The Gold Enthusiast

DISCLAIMER: The author has no positions in any mentioned security, and has no plans to enter trades in them in the next 48 hours.

 Related: Here’s Why Trump’s Trade War Isn’t Helping Gold

About the author

Mike Hammer

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals.

Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach.

Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

Leave a Comment