After a massive 8.7% rally since July 7, gold prices were due for some weakness. That weakness finally arrived last week, as prices dropped 1.9% between Friday, Sept. 8, and Friday, Sept. 15.
Fortunately, I had been warning investors that we should expect a pullback...
You see, the rally from Aug. 22 into Friday, Sept. 8, took the price of gold from $1,291 all the way to $1,351. That's a massive 4.6% gain in just over two weeks.
I said those gains had to be digested. I also pointed out that the U.S. dollar had sold off too far, with the U.S. Dollar Index (DXY) falling to a 32-month low of 91.35 on Sept. 8. Since it had become technically oversold, we were due for some sort of near-term bounce, and now the DXY is back up to 91.88 today (Monday, Sept. 18).
Both the DXY rebound and gold price correction are still running their course. I think we could see more consolidation, or even a bit more weakness, for the gold price in the interim.
But this decline will be brief, as gold prepares to resume its uptrend. Today, I'm going to show you just how much more gold prices will rally through the end of the year.
Before I get into my gold price forecast, let's look at gold's performance last week...
Gold Prices Post First Weekly Loss in a Month (Sept. 8-15)
After closing at $1,351 on Friday, Sept. 8, the price of gold started Monday, Sept. 11, with a sell-off. The metal fell to $1,335 by the open as the DXY rose from 91.50 to a peak of 92. However, gold managed to recover those losses and ended the session flat at $1,351.
Tuesday was more of the same behavior, as gold prices endured weakness early in the session before recovering by the close. They opened lower at $1,325 and climbed higher throughout the day, settling back at $1,351 for no gain.
But the gold price took a beating on Wednesday, as the dollar rallied toward 92.50. That caused a sell-off in gold, which started the day lower at $1,333 and closed at $1,328 for a 1.7% loss on the day.
Here's a look at the DXY's strength last week...
On Thursday, Sept. 14, gold managed to claw back somewhat. The DXY retreated from 92.50 to 92 on the day. This bumped the gold price just 0.1% higher to close the session at $1,329.
But weakness returned on Friday, Sept. 15, even as the dollar sold off below the 92 level. The price of gold fell 0.3% that day to close at $1,325. With that, gold posted a weekly decline of 1.9%.
Urgent: Executive Editor Bill Patalon just saw something on his precious metals charts he's only seen twice in 20 years. He calls it the "Halley's Comet of investing" - and it could lead to windfall profits. Read more...
The gold price today (Monday, Sept. 18) is down another 0.8% and trading at $1,315. This comes despite the dollar trading near the same 92 level it was at on Friday.
Right now, all eyes are on the dollar to see if it can actually maintain this rebound from two-and-a-half-year lows. I think it could keep pushing higher in the short term, but it should start to lose steam as we get deeper into the last quarter of 2017. This will open up some profit opportunities for gold investors.
Here's my bullish gold price target for the end of 2017...
Gold Prices Could Rally to This Target by the End of Q4 2017
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At this juncture, the DXY's next moves will be of huge importance to the gold market.
If the DXY can steady above its current 91 range over the next few days, that will help confirm a near-term uptrend for the dollar, which would likely weigh on the price of gold...
So here's what to look for...
First, we need to see if the DXY closes above 91.30 - which could happen today, given its current 91.80 level. If that happens and then it turns higher and closes above its Sept. 13 high of 92.50, odds are good we'll see a mini rally. That could take the DXY to 94 or even 96.
This would work against gold prices, but any weakness would likely just be short term...
We've already seen gold pull back from its recent peak at $1,351 early last week. And both the RSI and MACD momentum indicators (highlighted in the chart above) have retreated and could decline even further.
With gold now at $1,322 and some possible wind in the dollar's sails, I still think gold could weaken a bit further to test the $1,300 level. But I wouldn't expect much further weakness beyond that.
That's because gold's fundamentals remain bullish for the long term...
Consider that the dollar's dominance as a global currency is facing greater challenges, while demand for gold simultaneously continues to expand.
A perfect example that melds these two trends - "de-dollarization" and rising gold demand - is China's announcement earlier this month. The country - which is the world's top oil importer - said it's preparing a crude oil futures contract that will be denominated in Chinese yuan and convertible into gold.
Oil has traditionally been priced in the U.S. dollar, so this shift away from it as a benchmark currency for commodities will likely weaken its long-term value. While yuan-priced oil will allow exporters like Saudi Arabia and Russia to bypass the U.S. dollar benchmarks, the yuan-priced contract's ability to convert into gold will inevitably boost gold demand.
In summary, I see those two trends pushing gold higher after its current consolidation ends. I expect the gold price to climb 3.6% to $1,362 in the next few months. By the end of 2017, I see it reaching $1,400 - up 6.5% from today's price of $1,315.
Up Next: Rare Gold Anomaly
Money Morning Executive Editor Bill Patalon just caught something on his gold charts that he's only seen twice in the past 20 years. A $13 billion gold anomaly he calls the "Halley's Comet of investing."
It's very rare, and fleeting, and Bill sees things lining up perfectly to bring some very sizable precious metal profits to well-positioned investors.
Click here to check out his research...
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