The gold price today (Friday, May 12) is up 0.5% to $1,230 per ounce. If it maintains that momentum throughout the session today, it will mark its third straight day of gains. That would be the longest winning streak since mid-April.
In late April and early this month, gold had clearly become a relatively hated commodity. From April 21 to May 5, the metal fell 4.8% to $1,227. The French election of "centrist" Macron elated markets and removed the attraction of gold as a safe haven, at least temporarily.
But now signs are emerging that the gold price retreat is possibly coming to an end.
After climbing to within inches of $1,300 in mid-April, gold began selling off. Both silver and gold prices have been testing multi-month lows, while gold itself could be in the process of getting a slight leg up. If that turns out to be the case, then we'd be looking at a bullish setup for the precious metal.
Additionally, other technical indicators on the fundamental and sentiment sides have become supportive of the price of gold, possibly pointing to strength in the near future.
And despite a victory for the status quo in France, gold's action in Europe and elsewhere has been quite telling.
Let's dive into the French election's bullish effect on gold prices. Then, I'll show you my bold price target for the end of 2017.
Gold Price on Track for 0.2% Weekly Gain Thanks to the French Election
After closing at $1,227 on Friday, May 5, gold traders waited on Sunday to see who would win the French election. The showdown was between centrist Emmanuel Macron and far-right candidate Marine Le Pen, with Macron expected to win by a big margin.
Essentially, gold saw what the polls saw, and expected Macron to win. The risk of a French exit from the EU ("Frexit") had disappeared for now. Still, the price of gold jumped to $1,234 late Sunday once Macron officially won.
However, Macron's win assured gold investors there would be no market volatility since there was no chance of a Frexit on the horizon. This dragged gold lower on Monday, May 8, and the metal eventually settled at $1,226 for a 0.1% loss.
In the last three weeks, the main French index, CAC 40, was up 8%, while Germany's DAX was up 6%. Clearly, European markets were expecting France to elect someone unlikely to upset the status quo, which the country did. That urged investors into stocks, which happened around the same time the gold price peaked.
As this chart shows, the U.S. Dollar Index (DXY) regained some strength this past week, rising over 100 basis points to 99.66, creating additional headwinds for gold...
On Tuesday, May 9, gold sank to its lowest since early March lows as the dollar rallied. Prices opened at $1,223 and kept falling throughout the day. They settled 0.8% lower at $1,216 by the close.
But the tides started turning on Wednesday as gold opened higher at $1,223. Despite some losses by mid-afternoon, the gold price managed to climb to $1,219 by the end of the day. That marked a 0.2% gain from the previous close.
Thursday continued the rebound with gold opening slightly higher at $1,220. It steadily climbed to $1,225 by the close for a 0.4% gain.
The price of gold today is up another 0.5% to $1,230, marking a third straight session of gains. According to data from FactSet, that streak hasn't been seen since mid-April. Gold is now poised for a weekly gain of 0.2%.
Right now, it appears gold prices are coming out of their gully now that the noise from the French election has mostly died down. I expect the metal to keep moving higher from here thanks to some strong fundamental factors that will stay important this year.
Here's how high the gold price could go...
This Is Where I See Gold Prices Heading in 2017
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The gold price should continue to see some support thanks simply to rising demand and declining supply around the world.
A recent report by the World Gold Council showed that gold demand in Q1 was 1,034.5 tons. That outpaced the 1,032 tons of supply during the same three-month period.
European investors, from Germany and the UK in particular, bought eight times more gold ETF product than their American counterparts. The first quarter was the third straight quarter that European gold ETF buying outpaced U.S. demand, which could indicate Europe's sense of unease over global markets.
In Asia, physical demand has remained robust. A research report by Joni Teves, a precious metals strategist with UBS, said investors should expect some consolidation for gold in the wake of Macron's French election victory.
She went on to say that purchasing of physical gold could increase if gold falls near the $1,200 level. Teves also cited strong March imports in both India and China as positive for market sentiment.
Looking at gold's price chart above, we do see what may be some basing action in the last couple of days. At the same time, the RSI indicator has climbed from a low at 30, providing further support that gold's bottoming and preparing to head higher.
Elsewhere, we have Credit Suisse repeating its April forecast of gold prices reaching the $1,400 level by Q4. The bank cited possible lower interest rates and a softening U.S. dollar as the reasons for the rally.
As you know, I've been calling for the $1,400 target by the end of 2017 for some time now. I strongly believe the gold supply deficit will help lift prices to that target this year.
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