With the Federal Reserve in no hurry to raise interest rates, analysts are expecting the gold market to continue to react to ongoing geopolitical concerns created by the new Trump Administration.
Geopolitical uncertainty and what analysts have described as “saber rattling” from President Donald Trump has helped to weaken the U.S. dollar, causing gold to end the week near a 12-week high. April gold futures settled the sesion at $1,220.8 an ounce, up 2.5% since the previous week.
The silver market is also ending the week higher, posting sixth consecutive week of gains. March silver futures last traded at $17.479 an ounce, up 2% since last Friday.
Next week, with little economic data to be released, analysts agreed that gold will focus on geopolitical uncertainty, which doesn’t appear to be abating any time soon. Colin Cieszynski, senior market analyst at CMC Markets Canada, said that markets will continue to react to the fact that the new administration has pretty much picked a fight with all of its allies, which has caused the U.S. dollar to tumble.
“I think markets will continue to react to Trump. Investors are going back into gold because they just don’t know what he is going to tweet next,” he said. “The potential for a major political misstep is growing.”
However, if Trump is able to focus on other issues like moving his fiscal or tax reform policies forward, that could calm markets, taking some momentum away from the precious metal, he added.
One particular focus for some analysts will be potential comments from Trump regarding the U.S. dollar. Traditionally the U.S. government has pursued a strong dollar policy; however in the last week, Trump trade advisor Peter Navarro said that Germany is benefiting from a “grossly undervalued” euro.
“The U.S. dollar is getting to levels where we could see significant long liquidation. The U.S. dollar is going to be sensitive to Trump’s comments,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“If there is significant selling in the U.S. then we will see a strong bid in the gold market,” he added.
Fawad Razaqzada, technical analyst at City Index, said that while he is watching the U.S. dollar, he is also watching equity markets. If the U.S. dollar weakens but equities push to new record highs, gold could still suffer, he said.
He added that he is bullish on gold in the near-term as prices push above $1,220 an ounce.
“If we break above $1,220 an ounce, there is a good chance that prices move to $1,250,” he said.
Source: SMM News
