By the start of last week, gold prices looked like they were going to pull off a 180-degree reversal.
After testing a daily low of $1,175 in mid-August, gold managed to regain $1,200.
Gold then went on to touch $1,210 and even $1,214, thanks in large part to the U.S. dollar, which was finally showing signs of topping out.
The U.S. Dollar Index (DXY) rally to 97 finally petered out.
MarketWatch highlighted the fact that despite ending higher last Friday, the price of gold closed down for the month of August. That meant five consecutive months of lower prices, something gold prices haven't done in over five years.
But with the dollar's momentum reversing and gold entering its strongest season, this could signal the start of the next gold rally we've been waiting for all summer...
How the Dollar Moved Gold Price Last Week
Gold started out last week on a strong note, blasting through the crucial $1,200 level and beyond.
But that Monday (Aug. 27) surge, which carried through from the previous Friday (Aug. 24), would end as soon as early Tuesday (Aug. 28) morning. Until then, the dollar had been selling off as the preliminary U.S.-Mexico trade deal had been announced, relieving some investor anxiety.
By then, the DXY had become a little oversold, and from a low of 94.50, the dollar began a new rally.
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After attempting to push toward 95 on Wednesday and Thursday, the DXY finally managed to reach 95.2 by midday Friday.
Here's a look at the DXY over the last week...
Before that surge, the DXY dropped to 94.60, allowing gold to rise to $1,208 in the early hours of Friday morning. As the dollar rose to its 95.2 peak, it weighed on gold, which dialed back through the morning all the way down to $1,198. But the dollar gave up a little to end Friday around 95.10.
That was just enough to allow gold to regain the all-important psychological threshold of $1,200 to end the week.
Then on Monday (Sept. 3), gold spent most of the morning north of $1,200 - but just barely, as the bull and bears fought it out.
What happens to gold prices next depends largely on whether the dollar's rally has ended or if still has legs.
Next, I'll turn to the technical indicators to forecast gold prices as we head into the fall...
My Latest Gold Price Forecast for the Fall
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It's quite possible that the dollar index's rally has run its course.
If you're a dollar bull, then I think the best you can hope for is a new range from 92.5 to 95.
If you're a dollar bear, then maybe we could see the DXY drop to the high 80s.
Either way, I think 95 will now act as overhead resistance providing a "cap" on higher levels.
Take a look at the support levels on the DXY in this chart below...
As for gold, it seems as though momentum will favor the upside from here.
As you can see, gold just bounced off a two-year-long resistance level and has plenty of room to run higher...
However, there's still some risk of further downside, perhaps to test the December 2016 low of $1,135 if the dollar does manage to muster new strength.
Otherwise, higher seems to be the path of least resistance.
Looking at the relative strength index (RSI) and moving average convergence divergence, gold's momentum does seem to have shifted upward. So far, it's made a couple of higher lows in the last two weeks.
If this pattern continues, my next target is the $1,220 to $1,230 range, then $1,260.
I've highlighted the momentum indicators I'm seeing, including the potential target lines I expect for gold in the chart below.
And if a global event spooks equity investors, we could even see $1,300 in short order.
Frank Holmes of U.S. Global Investors recently pointed out that anyone in Venezuela who's owned gold for that past several years is very happy. In a country where the average person lost 24 pounds last year and now 90% live below the poverty line, owning a stable asset like gold may have meant the difference between starving and eating.
As per Frank, "At some point, hyperinflation gets so ludicrously out of control that discussing exchange rates becomes pointless. But as of July 30, an ounce of the yellow metal would have gone for 211 million bolivars - an increase of more than 3.1 million percent from just the beginning of the year."
As you can see, gold's ability to act as a safe haven in the face of a geopolitical crisis will keep its demand high.
There are plenty of good reasons to own gold, but it can scarcely get better than this.
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