Gold one of the few winners today
Gold is about the only asset that's higher this week but the overall move has been disappointing with prices up only $17/oz since the start of the week. That could change in the weeks ahead.
1) Gold hit a four-and-a-half month high today at $1244. It's a technical break above the October high if we can close above. There's also a minor inverted head-and-shoulders pattern with a target of $1300 and not much stands in the way of a return to $1350.
2) gold is the classic safe haven and there's clearly demand for safety right now.
3) The Dec 19 Fed hike was once thought of as a done deal, it's down to 64%. If they hold it's going to undercut the US dollar and help gold.
4) Q1 is a seasonally very strong period for gold. Last year - perhaps in anticipation of that - we saw some earlier buying with the rally starting in mid-December. Through January, that rally was about 10% and then gold held steady through Q1.
5) Competition for safe assets has diminished with the decline of cryptocurrencies.
6) There's a better case for inflation now than there has been. The jobs market is tight and if rates stay low or go down, we are stoking the fires of inflation, especially if a China-US deal comes together.
7) There's also a case for gold if China-US tensions grow. It adds uncertainty on every front from growth, to politics, to currency policy to monetary policy.
