Monthly reviews

The gold market starts a new year with strong positions


Gold completed 2017 with a confident ten-day rally and breakup through psychologically important level of 1296-1300. It is important that during the New Year holidays, the upward momentum was not lost and it is especially important that on the first day of the new trading year, gold continued to gain, which is a very good signal and a confirmation of the strength of the upward trend.

Geopolitical risks of the last days and weakness of the US dollar continue to push the price of yellow metal up, opening more and more prospects for gains.

Geopolitical risks smoothly pumped from 2017 in 2018 and also support the demand for gold, as the main safe-haven asset. Brexit, the political crisis in Germany, domestic political tension in the United States, the vote on independence in Catalonia and Iraqi Kurdistan, the tense relationship between the US and the DPRK and the US –Iran situation, and other geopolitical problems have a long-term character. Therefore, the preservation of all these problems will support the long-term demand for gold.

The US currency ended the trading 2017 year with a strong decline. The dollar index (DX) declined during nine trading sessions in a row, and approached 2017 lows. The decrease in the value of the American currency positively affects gold market, precious metal is nominated in dollars and becomes more accessible to holders of other assets, which contributes to the growth of demand for precious metal.

This situation is due to changes in market expectations regarding the increase in US interest rates. The Fed plans delay (the markets currently expect a rate hike in the middle of the new year) is a positive factor for bulls and makes gold a very attractive medium-term asset for many investors.

All the fundamental factors mentioned above that supported gold in late 2017 continue to influence the market in early 2018, which is the reason for the continued growth of gold. First new year trading week will contain quite important events (the publication of the 'minutes' of the December FOMC meeting, the publication of PMI indices, labor market data) that will change the alignment of forces in the market. In general, we are waiting for a very interesting and busy week. Although the expected return of the main market trading volume will likely happen by January, 5.

The technical picture for gold remains favorable for bulls. The daily chart price broke through a very important resistance level of $1300 and is now trying to gain a foothold above it. The market consolidates at $1312. Moreover, the technical picture suggests that there is a very high probability that the market will gain a foothold on these levels. If this happens, then in the long term, the price will have a very good chance of continuing growth towards the 2017 high near 1352.00. The scenario is now supported by technical indicators.