February gold recently broke out to levels we have not seen since mid-July. The biggest news this week came on the heels of the FOMC meeting and the decision to hike interest rates once again by a quarter basis point. This is typically a very bullish event for the U.S. dollar, and bearish for gold. However, in this situation, it was widely expected that a hike was likely, and a more dovish tone was going to be taken by Fed chair Jerome Powell. He did the complete opposite, pressuring gold initially.
Thursday’s move in gold has me confident that we are going to make a run back toward the psychological level of 1300 over the coming months. You have several fundamental aspects that line up right now such as fear (and a lot of it) of economic slowdown and stock market volatility that has investors fleeing riskier assets and pushing money into safe havens. Another reason is the likelihood of a prolonged government shutdown. The border wall is likely to be a sticking point for President Trump, and this will push more fear into the market. The single biggest factor that I see pushing the gold market higher over the coming months besides the obvious stock market selloff, is the break in the U.S. dollar index. It’s pushed down to 1-month lows and broke the nice channel it had been in for months. This more than anything will continue to support gold at the 1250 level, and give it gas to run toward 1300 and beyond.
Gold Feb ’19 Daily Chart