The gold price today (Friday, April 28) is up 0.1% to $1,267. While that puts gold on track for a 1.3% gain in April, it caps off what has otherwise been a poor weekly performance.
Earlier in April, gold prices pushed through the resistance level, and now they seem to be retreating.
In the gold futures market, that showed up as a sharp rally from $1,257 to $1,288 during the week ended April 14, but it was on little more than average trading volume.
I told you to expect another test of the $1,260 200-day moving average, and that's exactly what we got this week.
Although the price of gold is looking pretty stable on a technical basis, its counterpart silver has been breaking down thanks to overly bullish trader sentiment.
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I think silver prices have more correcting to do, and if that's the case, we may see one of those rare instances in which the gold price follows silver's direction.
Still, fundamentals remain strong with robust demand in Asia and a favourable seasonal trend for the next several weeks.
Additionally, inflation-adjusted interest rates are expected to remain weak and continue down into negative territory. This will serve as a boon for gold prices.
Before we get to where gold prices are headed from here, let's look at what moved gold prices over the past week.
Gold Price Today Rebounds Despite Weekly Loss
After closing at $1,284 on Friday, March 21, the price of gold opened lower on Monday, April 24, at $1,269. Interestingly, this followed a similar pattern to the DXY, which also weakened in morning trading. Although gold moved higher throughout the day, it closed the day 0.6% lower at $1,276.
On Tuesday, April 25, gold prices fell even further despite more weakness in the U.S. Dollar Index (DXY). The metal settled at $1,264 for a 0.9% loss on the day.
Here's how the DXY has trended this week...
Wednesday witnessed a bit of renewed strength in the dollar, and again the gold price followed its movement. For these past three days, it's been as though both the dollar and gold were being bought or sold for their safe-haven qualities. Gold opened flat at $1,264 and climbed to close 0.4% higher at $1,269.
The price of gold saw a change of pace on Thursday as it actually moved opposite the dollar. As the DXY gained strength, the metal declined 0.4% to close the day at $1,264.
The gold price today is currently up 0.1% to $1,267. That puts it on track for a weekly loss of 1.3%.
While the short-term picture for gold has clearly not been looking good, there are multiple factors working in the gold price's favor over the medium and long term.
Here's precisely where I see gold prices heading by the end of the year and the biggest factors that will move the price of gold...
Our Gold Price Prediction for the Second Half of 2017
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If you look at gold prices on a medium-term basis, you'll see they're in an upward price channel (denoted by the green lines)...
The green lines show that gold seems to have support around $1,250, which is near its 50-day moving average. Like I said last week, the gold price, plus its 50-day and 200-day moving averages, are all converging to around $1,260. This is a level we'll be watching closely in the coming weeks.
We also know now that one of the world's biggest gold consumers, India, imported roughly 230 metric tons of gold during the first quarter. That's the highest imports for Q1 in four years and a surge over the pace of imports in 2016.
Also, Russian official reserves have been climbing. March numbers have pushed holdings up some 800,000 ounces to 1,679 metric tons, just 164 metric tons shy of China's official number.
But weighing against the gold price has been the recent behaviour of gold miners, as you'll see via the Gold Bugs Index (HUI) below...
While the gold price pushed through and is still above its 200-day moving average, the Gold Bugs Index (HUI) has been unable to achieve the same feat. As well, the HUI's recent mid-April peak was below its February high. Watch for the possibility that gold stocks will lead gold lower.
If gold comes under more pressure, I could see it test the $1,250 or possibly even the $1,220 level before bottoming. But down the road in the second half of 2017, I'm still looking for gold to tack on another $150 to $200. Considering the high end of that range, it would be a 15.8% gain from the current price to $1,467.
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