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.
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.