For TSX Venture investors, action in the gold market has taken centre stage in recent weeks. Bill Baruch, founder, and president of Blue Line Futures, is targeting $1,480 in gold. After breaking out to $1,450 gold is trading at just $1,406 Thursday morning. While gold has broken through resistnace in the mid $1300s, the US dollar is still too strong. So, further technical work is needed along with a decline in the US dollar.
Central Banks Turn Dovish as Global Growth Fades
Baruch explains,
“Global growth has been deteriorating for a while, and now it’s the trade war just speeding the process up.”
Furthermore,
“If we see progress on the trade war, then the dollar could sell off, and gold lifts higher. Looking at the Fed being more dovish than expected in the meeting last week, ultimately that helped lift gold higher, by putting a little bit of pressure on the dollar.”
The Canadian dollar and others continue to strengthen against the dollar in recent sessions.
Still, one thing bolstering dollar support is the ongoing trade wars. Baruch explains,
“The dollar hasn’t really sold off, and one of the reasons why is because there’s a lot of safe-haven tailwinds in the dollar because of the trade war.”
Looking at the US Dollar index, one can see it still trading near the top of its range in recent years.
US Dollar Index – 10 Year Chart
Canadians can all remember back in 2011 when the Canadian dollar was at par with the greenback. Back then the DXY traded as low as 74.30 and didn’t recover strongly above 80 until 2014. By then, it was clear the US recovery was intact, and the economy appeared to be on solid footing.
Despite gold being about $500 from its nominal high above $1,900 in September of 2011, it recently traded to all-time highs in many currencies, including the Canadian dollar.
Where Does Gold go from Here?
Baruch goes on to explain that the path of least resistance is both technically and fundamentally higher.
Baruch concludes,
“It’s a matter of where we go from here in the sense of holding support, and a more immediate term move higher, or consolidation before moving higher.”
Good news for gold stocks and junior mining investors. It appears the long, long bear market in gold and gold stocks is finally coming to an end. If the US dollar shows signs of weakness, which Trump is calling for, it could mean much higher gold prices.
