Last week might’ve been a short trading week, but it was packed with the sort of financial news that sends the price of gold higher.
This latest gold rally pushed the metal to a fresh five-month high and close to a new breakout level.
Of course, the G-20 summit in Buenos Aires provided an early boost for gold prices, as the United States and China agreed to a 90-day truce with no new tariffs, as they work toward resolving their trade disputes.
But stress in bond markets along with news of the arrest of Chinese tech giant Huawei’s CFO would turn sentiment around, crushing stocks and sending shelter seekers into gold.
The selling in general equities would accelerate later in the week, as investors became increasingly concerned the U.S. economy may be slowing, which could cause the Fed to turn dovish sooner than originally expected.
All that combined to pressure the dollar, helping to lift the price of gold in the process.
Let’s take a look at how the week unfolded and where I see the gold price heading next…
Negative News Was Good for the Price of Gold
Gold began last week’s Monday (Dec. 3) trading day with impressive force, driven by mostly by the positive trade news on U.S. – China relations. That was enough to push gold to $1,234 by late morning, just shy of the $1,236 high the metal enjoyed at the start of November.
Then the equity sell-off would peak…
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Gold would then power higher still on Tuesday (Dec. 4) as stocks sold off further. The “high” they had enjoyed on Monday’s news dissipated as the five-year T-Note yield dropped below the two-year note yield. That provided an ominous “yield inversion” warning, heightening concerns about a slowing U.S. economy.
You can see how traders reacted in the chart of the U.S. Dollar Index (DXY) below…
Midweek’s stock market holiday, due to the funeral of former U.S. President George H.W. Bush, saw dollar index consolidation around the 97 level, while gold did essentially the same, hovering around $1,237.
Thursday’s (Dec. 8) action was characterized by an even lower open than Tuesday’s close, with stocks fighting to move higher but losing, except for the tech-heavy Nasdaq, which eked out a tiny gain. Fears did manage to dissipate slightly.
Here’s how that action looked:
But as the trading week ended, stocks opened in the green but quickly turned red and kept heading south. The DXY joined in the action, approaching 96.5 by the end of the trading day. This combination did wonders to lift gold, which spent the day climbing, reaching ever closer to $1,250.
Now that gold prices are starting to rally, my latest gold price prediction is looking even better…
Where Gold Prices Will Rise During the Latest Rally
The dollar may finally be trending more clearly downward.
The DXY now has just put in two lower highs since peaking in early November. This downward trend has been getting confirmation since late October. That’s when both the relative strength index (RSI) and moving average convergence divergence (MACD) momentum indicators peaked.
I’ve outlined these trends in the chart below…
Analysts are increasingly calling for a weaker dollar next year, and the action of the past month may well be the start.
As for gold itself, the action of the past week has been quite bullish, and it continues to be confirmed by the moves in the RSI and MACD of the past month.
If gold can now hold the $1,240 level, the target I mentioned last week, then the next target should be $1,260.
I’ve also highlighted these positive trends, plus the crucial $1,260 price target I’m eyeing here…
The $1,260 level is where gold met overhead resistance back in early July, as you can see on the chart. Plus, it lines up right with gold’s 200-day moving average. That confluence is a big reason why I see $1,260 as the next target.
And looking at gold stocks, we also see a bullish development.
Two weeks ago, I said that the VanEck Gold Miners ETF (NYSEArca: GDX) would need to close above $20 in order to be able to kick off a new rally.
In fact, the previous high of $20.10 was back in late October. With Friday’s close at $20.20, GDX has now surpassed that level.
My next targets are still $21 (near the 200-day moving average), followed by $22.50.
You can see them here…
All in all, it’s been a great week for gold and gold stocks. And if worries about an economic slowdown persist, the dollar’s likely to face more headwinds, doing even more to push gold higher still.
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