There's been no shortage of forces pushing and pulling on the price of gold over the past week.
Federal Reserve minutes, stocks, the dollar, rising bond yields, budget deficits, inflation, sentiment, and even simple demand versus supply.
Gold gave up most of the gains it managed to tack on in the previous week. The bulk of that weakness came on Tuesday, as traders were preparing for the Fed's January meeting minutes due out Wednesday.
Then came Wednesday, and gold put on a brave rally in response to the Fed, but quickly reversed to end the day.
Some Fed Open Market Committee members see economic growth accelerating faster than they did at their previous meeting. That caused the Dow to pop - along with gold prices - initially.
But then traders digested that and became concerned it could cause the Fed to raise rates faster than expected, perhaps hiking rates four times rather than three this year.
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Bonds sold off, pushing the 10-year yield to near 3%, a level not seen since late 2013. In response, stocks sold off and gold joined them, losing a few dollars on the day.
But what's been striking is gold's quiet resilience in the face of a bouncing dollar and rising yields.
I think this year will mark a clear resumption to rallying gold prices, and after we recap last week's gold price performance, I'll show you exactly why...
Why the Price of Gold Moved Last Week
After the quiet trading day for gold on President's Day (Feb. 19), the precious metal followed up with weakness as traders turned their attention to the next set big catalyst: the Fed minutes.
On Tuesday, Feb. 20, the U.S. Dollar Index (DXY) enjoyed a early morning rally, perhaps in anticipation of news that the Fed may be more hawkish on rates.
The DXY ran up from 89.35 to 89.70 by 9:00 a.m. Gold opened at $1,339 but sold off into late morning, reaching $1,329 by 1:00 p.m. The DXY held steady to 89.7 at 5:00 p.m., while gold then also moved sideways to close at $1,329.
Wednesday (Feb. 21) was the day FOMC meeting minutes were released. And like I detailed above, the minutes showed Fed officials were anticipating higher-than-expected economic growth. But faster economic growth could mean quicker rate hikes and higher bond yields, which compete with gold.
So the yellow metal, which opened at $1,328 and spiked to $1,335 just after 2:00 p.m., did an immediate reversal and sold down to $1,322 before a minor rebound to $1,323 by the close.
Check out how the dollar spiked on Wednesday after the minutes were released...
Gold would suffer a bit more weakness overnight Wednesday into Thursday, as the DXY bounced above 90 and stayed there until just before 9:00 a.m. The DXY then sold off to around 89.75, allowing gold to regain some strength. The precious metal opened at $1,323, then rallied throughout the day to reach $1,331 by the 5:00 p.m. close.
And finally, to end the trading week, gold pulled back once again as the DXY made another run for 90 but hovered for most of the day around 89.9. Gold moved sideways, opening at $1,330, and by late afternoon, it was still trading at that level.
While gold prices showed some signs of weakness, they've actually held up better than expected. That's giving me more reason to expect a gold price rally this year.
Here's my gold price target after last week's price action...
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Despite the pressures of rising bond yields and the prospect of higher Fed rates, gold has been a stalwart.
Here's why...
Trump's massive tax cuts are triggering equally massive budget deficits. That's spooking the markets, as it's sure to lead to higher rates. Bonds are already selling off.
On Wednesday, the 10-year Treasury yield hit 2.94%. That's just shy of the crucial 3% level not seen since late 2013, and it's already more than twice the yield in July 2016.
Take a look at the recent spikes in the Treasury yield...
The prospect of higher rates is causing market observers to shy away from the dollar, and that is in turn what's helping to support gold.
Here's a look at gold's price action over the past year.
You can see the price soared from last December, when the Fed hiked rates. Despite the recent pullback, gold's looking pretty resolute and so far has managed to stay above the $1,312 support level.
Also, the gold price appears to be forming an upward trend channel and is currently right at support.
I think we could be due for renewed dollar weakness and some temporary stock market weakness as the recent correction continues to play out. Both of these should be good for gold.
I've been saying the next price level to watch in gold is $1,365, as that's the previous high from mid 2016, which was tested again in January.
Here's a look at gold's price chart and the $1,365 resistance level...
$1,400 will be just a chip shot from there, which could come much sooner than many think.
And in my view, $1,500 gold has a great chance of becoming reality in the second half of this year.
Multimillionaire Gold Investor Discusses What He's Investing in Right Now
Industry legend Rick Rule just joined us for this exclusive interview... inside, you'll see why he believes this month's repeated stock market drops have ignited a roaring bull market for a particular gold investment.
And we have to agree.
But you'll want to watch this all the way through - as we're not talking about bullion.
The last time this happened, it was enough to turn a small investment into a cool million...
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