The gold market continues to move higher as strong market fundamentals and an improving technical posture fuel further buying. A variety of factors is behind the market rise and there are currently no indications that recent upside will end any time soon.
What’s Behind the Rally?
The gold market has several key factors working in its favor that may be fueling the current rally. The notion of increasingly-dovish central banks, including the Federal Reserve, is likely a primary catalyst. The latest Fed meeting minutes are set for release this Wednesday afternoon and markets will closely examine them for further clues regarding the central bank’s monetary policy plans. According to ai-cio.com, the minutes may show just how dovish the central bank really is. Although Fed chief Jerome Powell seemingly caught markets off-guard with his last briefing, expectations for the minutes seem to be a little more mixed. The central bank has done quite the U-turn in recent months, going from hawkish to dovish, and investors may simply want to have a better read on its intentions.
Regardless of what the minutes do or do not say, the economy has clearly been showing some further signs of slowing that could keep the Fed on hold for the next several months or even the entire year. Any dovish remarks from the central bank may be construed by markets as the end of the rate hiking cycle and could potentially weaken the dollar while boosting hard assets such as gold.
Ongoing concerns over a global economic slowdown and U.S./China trade negotiations are also keeping a bid in the gold market. Trade negotiations last week in Beijing were reportedly productive and resulted in the framework for further talks. Talks are set to continue in Washington this week. Until an actual agreement is reached, however, a degree of risk aversion may be present in the marketplace.
The ongoing Brexit debacle is also keeping some investors risk averse. The deadline for a deal at the end of March is quickly approaching, and key issues still stand in the way of a deal.
The gold market, in addition to several bullish outside influences, also seems to be seeing a significant increase in overall demand. The market has been able to move higher despite stronger stocks and a stronger dollar which oftentimes have a tendency to weigh on the metal.
The bulls are out in force today, as spot gold prices are up $20/oz at $1,338.08. The market has now cleared the January highs and could potentially look to test previous resistance in the $1,350 region in the sessions ahead. The market is currently in a firm 10-week uptrend on the daily chart and has continued to see buying on any dips in price. A solid close above resistance in the $1,350 region could set the stage for a fresh and significant leg higher.