6 Reasons Why Gold Is Headed Higher In 2018
(Kitco News) - Following are six elements working in favor of the gold marketbulls and that should continue to support upward price movement in the preciousmetal.
RisingGovernment Bond Yields. A feature in the marketplace this week isrising world government bond yields (falling prices). This helped to hold backgains in global stock markets. Bloomberg news published a story Wednesday aboutthe Chinese government possibly re-evaluating and reducing its purchases ofU.S. Treasury securities. However, Chinese officials debunked that storyThursday. China is a massive holder of U.S. Treasuries. There have been recentproclamations from some veteran financial market analysts that the long-termbull market runs in U.S. Treasuries are over. This suggests rising interestrates and rising inflation. While the tighter monetary policies that generallycome with rising inflation have been bearish for the metals markets, per recenthistory, longer-term history actually shows that hard assets benefit fromrising inflation. Times of problematic inflation see the investing publicgenerally opt for hard assets, including precious metals, over paper assets.The next shoe to drop in this scenario of rising inflation will be a major topbeing put in the U.S. stock market.
U.S. Treasury Bonds: The weekly continuation chart fornearby T-Bond futures shows prices this week dropped to a nearly one-year low.See, too, that prices are way down from the 2016 high. A drop below chartsupport at the 2017 low, seen on the chart, would produce major chart damage tosuggest much more downside price pressure in the coming months.
U.S. Treasury Notes: The weekly T-Note futures chartshows major technical damage has already been inflicted, as prices this weekfell to a 6.5-year low. The serious chart damage suggests more downside pricepressure in T-Notes in the coming months. (Higher yields).
Technically Bullish Euro Currency: The weekly Euro currencyfutures chart shows prices in a longer-term uptrend and just recently hitting athree-year high. Importantly, the price action of the past couple weeks hasseen the Euro currency produce a bullish upside “breakout” from a trading range,to suggest another leg up in prices in the coming weeks, or longer.
Bearish U.S. Dollar Index: The USDX is a basket of six major worldcurrencies stacked up against the greenback. See on the weekly chart that theUSDX is in a longer-term downtrend. A drop in prices below chart support the2017 low, seen on the chart, would produce major longer-term technical damageto suggest another leg down in the USDX in the coming months.
S&P500 Looking Toppy: New record highs keep rolling in for theU.S. stock indexes, amid them being in major long-term price uptrends. However,the weekly continuation chart for nearby S&P 500 futures does show bearishdivergence with the Relative Strength Index (RSI). The RSI moved to a new highin early December and then backed off, while at the same time the S&P indexmoved on to new highs. This is bearish divergence with a technical indicator andis a technical clue a market is close to a major top.
Nymex Crude Oil Market is On Fire: Theraw commodity sector leader, the oil market, hit a three-year high this weekand has also recently punched above several stiff longer-term chart resistancelayers. This suggests more upside for oil prices, with the next major upsidetechnical objective being psychological resistance at $70.00 a barrel. It willtake a drop below solid longer-term chart support at $55.00 to produce someserious longer-term technical damage.
GoldCharts are Bullish: The yellow metal sees prices are in alonger-term uptrend as seen on the weekly chart. The recent rally in prices hasgiven the bulls some fresh technical momentum. However, prices will have topush above stiff chart resistance at the 2017 high, seen on the chart, to gainsolid power to then suggest much bigger price gains are forthcoming.
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