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What’s next for gold?

Mon, 21 Nov 2022 17:46:29 GMT

Gold prices slowed last week after climbing sharply the previous week. The metal closed the week at $1,754.40 per ounce.

The metal responded positively to improving inflation numbers; however, that rebound slowed last week. Going forward, gold may face fewer headwinds as the Federal Reserve’s actions begin to affect the economy and inflation.

The value of the U.S. dollar has increased significantly this year. It’s reasonable to expect some continued selling off as buying pressure decreases as interest-rate increases slow. It should be noted, however, that the Fed continues to use fairly hawkish language, and that relief for the metal may be short-lived. It may be several months before the price of gold experiences less downward pressure.

Gold vs. the U.S. dollar

Mon, 14 Nov 2022 17:14:05 GMT

Gold prices exploded upward last week, gaining almost $100 per ounce. This 5.5% weekly gain took out the two previous highs set in September and October, with prices closing the week at $1,769.40 per ounce.

This move in gold was inversely correlated with a sharp decline in the U.S. dollar.

Last week we noted that these trend reversals in gold prices and the U.S. dollar could signal a new uptrend in gold prices.

This signal may prove to be spot on. The key is the inverse relationship between gold and the U.S. dollar. Although the dollar had surged higher year to date against other currencies, U.S. inflation will eventually erode the value of the currency, leading to an increase in the dollar value of gold. In the end, gold remains a hedge against inflation.

Rick Andrews is president of Avant Capital Management.

Triple bottom

Mon, 07 Nov 2022 15:20:59 GMT

Last week, gold prices declined again to previous support levels, forming a “triple bottom.” They then shot up to the 50-day moving average, breaking the downtrend line. The metal closed the week at $1,676.60 per ounce.

The breakdown in the U.S. dollar that we looked for as a confirmation of the gold price reversal happened the previous week. Last week, the breakdown was reinforced when the dollar ricocheted down off its new resistance line.

These trend reversals in gold prices and the U.S. dollar happened after the Federal Reserve raised interest rates again. These reversals could signal a new uptrend in gold prices has begun. Now may be the time to consider adding gold to investment portfolios.

Rick Andrews is president of Avant Capital Management.

Reversal alert

Mon, 31 Oct 2022 14:41:02 GMT

Last week, gold prices continued moving up from the “double bottom” formation that signaled a coming reversal. A “weaker right shoulder” is now forming that could be the last downward push before the gold trend turns up. Prices closed the week at $1,644.80 per ounce.

The good news is the confirmation of this gold price reversal that we were looking for was a breakdown in the U.S. dollar, which has just happened.

This trend reversal in gold prices is now set with the breaking of the “weaker right shoulder” formation. Such a reversal after a three-month downtrend could be the start of a move up to the high set in August, or even extending further to the all-time high set previously this year. Investors may want to be ready to add gold to their portfolios if this buying opportunity happens.

Rick Andrews is president of Avant Capital Management.

Double bottom

Mon, 24 Oct 2022 15:28:22 GMT

Gold prices declined to the previous low set in September, forming a double bottom at around $1,620 per ounce. Prices bounced up from the support level and closed the week at $1,656.30 per ounce.

If this support holds and prices continue upward, then this double bottom could prove to be a significant reversal formation.

Also, we will continue to look for a breakdown in the U.S. dollar as a confirmation of the trend reversal.

This reversal in gold prices and the U.S. dollar could be technically signaled sometime after the midterm elections.

We may be entering a “Winter of Conflicts,” where major military, economic, and political battles will be fought: The war in Ukraine, the stagflation battle in the U.S. economy, and various conflicts arising over shortages of food and fuel in Europe and the global south. Gold may be a source of protection in these coming times.

Rick Andrews is president of Avant Capital Management.

Inflation spreads

Mon, 17 Oct 2022 12:47:00 GMT

Gold prices retraced back to the resistance/support line, closing last week at $1,648.90 per ounce.

Consumer prices rose 0.4% in September and were up 8.2% from a year ago, according to U.S. Bureau of Labor Statistics data released Thursday (October 13). Excluding food and energy, the core consumer price index (CPI) climbed 0.6% in September and 6.6% from a year ago. The yearly gain for the core CPI was the highest since August 1982, says CNBC.

Various analysts have described the fallout from the report. Jim Caron from Morgan Stanley Investment Management told Bloomberg TV, “It is brutal. ... The issue now is that inflation has moved from the goods sector and has permeated into the services sector."

Steve Chiavarone, senior portfolio manager at Federated Hermes, said, “This report raises the risk that we may see a new cycle high in headline inflation before the end of the year. With energy prices moving back up, a mid-90s oil price in December could see us surpass the 9.1% headline peak from June. Looking at the components, what is most worrying is the big jump in services. Service inflation is the most sticky.”

Neither the drawdown of the nation’s strategic oil reserves to increase supply nor the Federal Reserve’s raising interest rates to depress demand have managed to defeat inflation. With inflation remaining more persistent, gold can make a good addition to a portfolio as it offers a good hedge to inflation over the long term.

Rick Andrews is president of Avant Capital Management.

First signal

Mon, 10 Oct 2022 14:48:00 GMT

Last week, gold prices broke through the resistance line, indicating a reversal of trend to the upside as they climbed toward their 50-day moving average. The metal then closed the week at $1,709.30 per ounce.

This turn to the upside was not confirmed by a corresponding breakdown to the downside on the U.S. dollar chart.

While some may consider this a buying opportunity for gold, the current market environment remains unfriendly to the metal.

Gold is likely to have a friendlier market environment in the future once we see inflation rates lowering, allowing the Federal Reserve to be less aggressive with interest-rate hikes. Once that happens, the dollar may become less attractive to investors and reduce the headwind that gold is currently experiencing.