As expected, the gold price has struggled to regain the $1,300 level last week, but it won't stay below that price for long...
After reaching a monthly high of $1,305 on Friday, Oct. 13, the metal fell 1.8% last week to close at $1,281 on Friday, Oct. 20.
Sentiment toward gold prices is badly bruised as stocks continue to make new highs, causing interest in precious metals to wane. The Dow Jones Industrial Average closed at new record highs every trading session last week, gaining 1.9% over the five-day period.
Although the U.S. dollar has been mostly sideways for the past month, it has regained some strength in the past week. The U.S. Dollar Index (DXY) - which tracks the dollar against the euro, Swiss franc, and other currencies - is up from 93.09 on Oct. 13 to 93.90 today (Monday, Oct. 23).
Part of the dollar's rally comes from renewed talk of passing U.S. President Donald Trump's promised tax cuts. Last Friday, the GOP-controlled Senate approved a budget measure that would let Republicans start drawing up a tax-cut plan without support from Democrats.
In my view, the price of gold will likely stagnate over the next few weeks. News around the tax cuts and the 91.7% chance of a December rate hike should support the dollar and stocks, attracting money away from the gold market.
On the other hand, I find it interesting that Goldman Sachs Group Inc. (NYSE: GS) recently came out in favor of gold. The bank said it believes precious metals are still a relevant component of investors' portfolios, even though they offer no yield.
My sense is that we're going to get a surprising upside move from gold prices and gold stocks before this year is out. That's why I'm going to show you my bullish gold price target for the end of the fourth quarter.
First, here's a closer look at gold's decline last week...
The Gold Price Posted a Weekly Drop of 1.8% (Oct. 13-20)
Gold settled at $1,305 on Friday, Oct. 13, for the highest close since Sept. 25, but it couldn't maintain that high on Monday, Oct. 16. Although the price of gold opened higher, at $1,306, it fell throughout the day as the DXY rose from 93.09 to 93.31. The metal ultimately closed the session at $1,303 for a 0.2% loss.
Overnight trading into Tuesday morning didn't help, as the DXY kept running higher. As it peaked near 93.70 in morning trading, gold prices fell back to $1,284. They settled the day 1.3% lower, at $1,286.
Here's a look at the dollar's performance last week...
The gold price weakness continued into Wednesday even as the DXY fell from 93.49 to 93.36 by the end of the session. This dragged gold 0.2% lower, to $1,283, by the close.
On Thursday, Oct. 19, the price of gold bounced higher as the DXY fell back below the 93.25 level. This dollar weakness was enough to lift gold higher, opening at $1,286 and closing at $1,290. That marked a 0.5% gain for the session.
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...
But the specter of tax cuts dominated market news on Friday. Stocks rallied as the Senate passed a tax reform blueprint aimed at cutting the corporate tax rate down to as low as 20%. This boosted the Dow Jones by 0.7% and lifted the DXY from 93.27 to 93.66.
Of course, that again spurred gold selling, dragging the metal down to $1,281 by the end of the day. With that, the gold price posted a 0.7% loss for the day and 1.8% decline for the week.
And gold prices today (Monday, Oct. 23) are down again as the dollar climbs toward its highest level in nearly three weeks. The DXY is up to 93.90, while the metal is down 0.4% to $1,276.
As I mentioned, I think the gold price could keep heading lower over the next few weeks. The dollar's rally doesn't seem to be over, which could likely cap any gold gains in the short term.
But my longer-term gold price forecast over the next two months is much more bullish. In fact, I expect gold to reach this bold target before the end of 2017...
My Gold Price Prediction Shows a Double-Digit Gain Before 2018
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Right now, I predict gold prices will rally to $1,400 by the end of the year. That would mark a strong 9.7% rise from today's price of $1,276.
To better understand that bullish target, we need to take a closer look at the dollar, which has been gaining these last three weeks...
The DXY has now spent the last three weeks above its 50-day moving average near 92.77, and I think its rally could continue. A few more weeks of strength could well bring the DXY to 96 or 97.
But like I've said before, that doesn't have to mean weaker gold prices. Although a strong dollar would likely cap gold's gains, gold is still capable of steadily rising alongside the dollar.
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This chart indicates the metal has a strong chance of breaking higher alongside the dollar in the next few weeks...
I think prices will temporarily stay in the $1,280 to $1,315 range, but an upside breakout is likely in the next few weeks.
A look at gold stocks paints a similar picture...
It will be interesting to see if gold stocks lead gold prices. In any case, both seem to be building pressure as they prepare to move higher.
Other analysts agree on a bullish picture for long-term gold prices, with some forecasting gold to move as high as $2,000 in the next few years...
CPM Group's Jeff Christian, who is typically more neutral on gold, recently said he expects a new all-time gold high by 2020. In an interview with Macro Voices, Christian said, "for the annual average price to be $1,650 or $1,700, that means that you're going to have gold prices knocking on the door of $2,000."
I actually think we'll see even higher prices before then, but for right now, my target is still for a run at $1,400 this year.
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 sizeable precious metal profits to well-positioned investors.
Click here to check out his research...
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