Gold sharply higher on geopolitical concerns; Gundlach thinks gold poised for major breakout
Gold moved sharply higher today on reports that the U.S. will launch a missile attack on Syria, a continuing surge in oil prices, and lingering concerns about the trade war with China. At the moment, the yellow metal is up $11 at $1353. Silver is lagging but up 10¢ at $16.70. The dollar fell steadily overnight and is still trending lower in early U.S. trading. Consumer prices came in at a tepid 2.4% higher year over year – slightly higher but as forecast. Commodities are also ranging higher again this morning.
One of the more interesting comments on gold in a while comes from DoubleLine’s Jeffrey Gundlach. “We’re also at the juncture in gold,” he says, “not surprisingly, because it is negatively correlated with the dollar. We see that gold broke above its downtrend line, it’s got the same look. But now we see a massive base building in gold. Massive. It’s a four-year, five-year base in gold. If we break above this resistance line one can expect gold to go up by, like, a thousand dollars.” That resistance line is at the $1360 mark – $7 higher than the current price level.
Chart of the Day
Chart note (Originally posted 4/3/18): In my out-on-the-limb 2018 gold price prediction, I highlighted a shift in overall market sentiment as the chief determinant that would push gold and silver to higher ground. That shifting sentiment has begun to materialize. It is reflected in the stock market’s performance thus far this year – down about 6%. It also underlies gold’s performance thus far this year – up about 3%. This Sentiment Trader chart maps the direction of sentiment in the gold market. Note the general uptrend and firming since early 2016 along with the corresponding rise in prices. Sentiment is now in a new upswing after a soft February.
Chart note 2 (Update 4/11/18): I sent Sentiment Trader’s Jason Goepfert, the developer of this chart, a note last week asking if my interpretation of the chart, as discussed above, was in line with his own thinking and this is what he sent back:
“I would agree. Typically when the Optimism Index stays above 50, and rarely goes below 40 during bottoming processes, it’s a sign of a solid uptrend. Vice-versa for bear markets (stays below 50, with readings above 60 preceding peaks). So the past year or so has been constructive in that regard and I’d rate it as a positive for gold. I’d get nervous if it becomes too optimistic, above 70, or drops below 40 and gold can’t rally. So far, no signs of either.”