US-Dollar Gold Price: Views in favour and against an imminent trend reversal

News Arnulf Hinkel, financial journalist – 03.09.2018

While the COT report (COT short for "Commitment of Traders") for gold-based derivatives quantifies the market behaviour and thus the price expectations of forward investors, the weekly Kitco Gold Survey focuses on qualitative assessments of the gold price development. Analysts and traders of major US investment firms have stated factors that could in their view determine the short-term gold price development. Here are some key factors that Wall Street analysts and the World Gold Council believe may affect the price of gold in the near future.

Three arguments against an immediate turnaround

First of all, some analysts say that technical chart analysis shows that a downward trend has been established, as confirmed by the break below the psychologically important $1,200 mark in August. Other analysts expect a sideways trend before a possible turnaround. Secondly, it is widely believed that the US currency, inversely related to the US gold price, will continue to grow stronger for the time being provided that the Fed continues to raise key interest rates. A third argument aims at the intensified relation of the gold price and yuan since the trade conflict between China and the US has escalated – and the current weakness of the Chinese currency, which is also tugging at the gold price.

Three arguments for a gold price recovery

In its most recent Investment Update, the World Gold Council summarised what analysts believe are the key factors for a turnaround: First of all, we are seeing the lowest net long positions of gold-based derivatives on the forward market since 2006, which could indicate an imminent reversal of the current price trend. Secondly, the numerous geopolitical problems and the trade conflict between the US and China remain as yet unsolved, with no signs of easing in the near future. And thirdly, the weak US dollar gold price might create a strong incentive for long-term institutional and private investors to buy gold. 

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