Gold prices traditionally move inversely to the dollar. But when they move higher together, it could mean a breakout to the upside is coming. And that's exactly what we're seeing right now…
We are already halfway through February, and gold prices are still in the midst of a consolidation phase.
The most interesting thing about it is how mild it has been, at least so far.
Since crossing above $1,320 in late January, gold prices have traded in a pretty narrow range, closing between $1,307 and $1,324.
Even more impressive is how the price of gold has held up in that range, clearly above $1,300, in the face of a stronger U.S. dollar.
The U.S. Dollar Index (DXY) has actually rallied since the end of January, gaining as much as 150 basis points.
Normally a stronger dollar is bad for gold. But that's not always the case. There have been periods when both rose simultaneously.
And what happened to gold afterwards will impress you.
I'll show you exactly what that means for gold prices after we recap last week's gold price action…
The Price of Gold Moved Laterally Last Week
It was a relatively uneventful start to the week in gold as the price began last Monday (Feb. 11) at a low of $1,305. This was just as the DXY was beginning a new climb, having reached 96.8 at 8 a.m.
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The dollar rallied, pulling its index up to 97.10 by 2 p.m., and surprisingly, gold bounced back to $1,309 by mid-afternoon.
The dollar backed off on Tuesday (Feb. 12), retreating from an early-morning peak at 97.17, then dropping back to 96.7 by early afternoon. That was enough to give gold reprieve, allowing it to rally back to a close at $1,311.
But the dollar index soared back on Wednesday (Feb. 13), well above 97, peaking at 97.25 just after 5:30 p.m. Gold took it on the chin, bottoming at $1,306 at 3 p.m.
Here's the DXY in the rearview mirror for the past week:
Just before markets opened on Thursday (Feb. 14), it seemed gold wouldn't get any loving on Valentine's Day. Gold bottomed at 7 a.m. at $1,304. But lots of bargain hunters stepped in, bidding the metal back up to $1,311 at 8 a.m., finally closing at $1,313. Meanwhile, the DXY bounced between 97 and 97.25, finally ending the day at 97.
Then on Friday (Feb. 15), even as the DXY remained strong above 97, gold roared back, opening at $1,318. The dollar index sold down to 96.9 by the close, helping gold climb further to reach back above $1,320, closing at $1,321.
And on Monday (Feb. 18), with stock markets closed for Presidents Day, gold performed well. The DXY hovered around 96.8, but gold had begun climbing the previous evening, and it ended the shorter trading day at $1,326.
While I expect to see a bit more of this consolidation, gold prices moving alongside the DXY has historically been very good for the metal.
Here's why that could help gold reach my latest target price…
We're On Track for My Latest 2019 Gold Price Target
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.