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A good old-fashioned currency crisis is brewing, and it may be the catalyst gold prices need to return to bullish mode.
Turkey is mired in a currency crisis with international implications.
The Turkish lira dropped 15% against the U.S. dollar and is down 40% year to date.
Recently re-elected President Erdogan is telling his citizens to sell their dollars, euros, and even gold to buy Turkish lira in an effort to help prop it up.
The European Central Bank is saying it's concerned about Turkey's central bank's independence.
Lira weakness drove U.S. President Donald Trump to double U.S. tariffs on some Turkish goods, as a Turkish delegation in Washington discussed multiple issues of concern to both sides.
After re-testing a low near $1,200, the price of gold has bounced back as traders look for a fresh catalyst.
And the gold price action on Friday (Aug. 10) might have given them their answer.
Let's take a look at what happened, and then I'll show you my latest gold price prediction...
How Gold Prices Responded to Turkey's Crisis
Gold's start to last week was a rough one, as the U.S. Dollar Index (DXY) popped to 95.5 early Monday (Aug. 6) before backing down to about 95.35 through the afternoon.
That pushed gold prices down to $1,208, finally settling at $1,207 after an early bounce to $1,210.
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But after testing its lower support of 95, the DXY climbed later in the day to close at 95.60. The U.S. Consumer Price Index rose only 0.2% in July, suggesting a lack of inflation momentum.
Until then, the price of gold traded in a fairly narrow range (between $1,207 and $1,215) from Monday to Thursday (Aug. 9), ending Thursday at $1,212.
Then in the early Friday morning hours, gold prices dropped back again to $1,207 as the dollar index exploded from 95.6 to rise above 96. News of Turkey's lira plunge and the risk of European contagion rocked markets globally.
Take a look at the overnight surge of the DXY on Friday...
But then something impressive happened...
Gold reversed and soared within hours to $1,216 around 10 a.m.
By 2 p.m., the DXY was up at 96.4, and gold had backed off to $1,211. This was impressive because earlier in the week, gold averaged about $1,211, while the DXY averaged around 95.4.
Gold's resilience in the face of a rallying dollar suggests it's starting to act once again as the safe haven it's known to be.
And that's just the fuel we needed for my latest gold price forecast...
My Gold Price Forecast as the Currency Crisis Heats Up
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.