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Gold’s rallying — but should investors still be wary?
Gold on Thursday turned higher year to date, and some analysts say that the metal’s recent moves may indicate an end to its long-term downtrend.
On Thursday, futures prices for the metal GCZ5, -0.91% marked a fifth straight session gain, fueling a turn higher for the year so far, with prices up $3.40 an ounce, or 0.3%, from the last trading day of 2014. December gold on Thursday rose $7.70, or 0.7% to settle at $1,187.50 an ounce on Comex, the highest price for a most-active contract since June 19.
“Both the fundamentals and the technicals have turned in favor of gold right now,” said Brien Lundin, editor of Gold Newsletter.
Fundamentally, the likelihood that the Federal Reserve will not be able to begin rate increases until well into next year is weakening the dollar and boosting gold, says Lundin.
“After the Fed stood down at their last meeting, investors were worried that they knew something we didn’t,” he said. “Now, with recent indications of a slowdown in the U.S. economy, including the very disappointing September jobs number, we’re beginning to see the reality behind the fears.”
Data released early this month showed that the number of new U.S. jobs created in September slowed sharply, climbing by 142,000 versus expectations for a gain of 200,000. On Wednesday, the Fed’s Beige Book, a key report about the U.S. economy, offered a cautious take on the U.S. economy.
Against a backdrop of disappointing economic data, the ICE U.S. dollar index, a measure of the dollar’s strength against a basket of six currencies, has posted declines in four out of the past five weeks. It’s also trading lower this week to date as expectations for a Fed interest-rate increase this year has faded.
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