Gold Seeing Strong Support On Safe-Haven Flows, Weakening USD
Political and economic uncertainties under the Trump Administration, coupled with a weakening USD since the beginning of the year, have led to a sharp rise in Gold prices for more than a month.
Since late December, Gold has risen from its long-term lows around 1125 up to its current position in the mid-1230’s.
Demand for the safety of Gold has risen significantly as President Trump’s trade and foreign relations agendas have been met with opposition, confusion, worry and concern.
Worries have also arisen with regard to President Trump’s ability to push forward his promised fiscal stimulus plans timely.
President Trump and some of his Key advisers recently stated that the USD is too strong, and have attacked other countries for allegedly keeping their currencies weak in order to gain an advantage in trade, including Germany, China, and Japan.
These concerns help to pressure the USD while boosting USD denominated Gold.
Last week’s mixed NFPs (US jobs situation report) showed a better-than-expected number of jobs added in January, but lower-than-expected wage growth, a Key measure of inflation.
This data lowered expectations of a near-term interest rate hike by the Fed, thereby supporting short-term demand for non-interest-bearing Gold as a hedge against the coming growth and inflation.
Expect uncertainties boosting safe-haven flows are likely to increase as the Trump Administration extends its stanch protectionist stance, and as Europe faces mounting political risks in France, Italy and Germany.
Technically speaking, much will depend on how Gold’s price reacts around that Key resistance mark. A clear, sustained breakout above 1250 could signal heightened risk aversion in the markets, potentially opening the way towards my near term resistance target at 1300.