Gold Could Rise 20% as Dollar Retreats
Gold Could Rise 20% as Dollar Retreats By Michael Kramer – Investopedia
The price of gold could be on the verge of rising by nearly 20 percent to $1,600 per ounce, driven by a strong technical breakout and a dollar that has been weakening considerably. The U.S. dollar has fallen by about 10 percent so far in 2017 and could drop by an additional 13 percent, to 80 from current levels of 92, on the dollar index. A weak dollar, coupled with a technical breakout, should continue to push, gold prices higher.
The Technical Breakout
The chart below shows that after falling by nearly 45 percent from its highs in late 2011, gold first bottomed in late 2015 at around $1,050 per ounce. Since then, gold has mounted a comeback, rising by about 26 percent, to around $1,325. Additionally, the chart shows that the price of gold has now broken above that 2011 downtrend, as noted by the orange line.
Since bottoming in 2015, gold has trended higher, as demonstrated by the green line, which has acted as a technical support level, which gold can continue to rise along in the future. The first test for gold comes around the $1,400 price, where there is a mild technical resistance level. The much bigger test comes at a technical resistance levelnearly $200 higher at $1,600.
Inverse Relationship To The Dollar
Gold is already up by almost 15 percent so far in 2017, fueled by the falling dollar, which has an inverse relationship with gold like other commodities. Because gold is priced in dollars, as the value of the dollar declines, it takes more dollars to buy an ounce of gold. The chart below shows the relationship between gold and the U.S. dollar Index, which is used to measure the value of the dollar versus a basket of currency. (See also: Why Bitcoin Could Fall By 30 Percent.)