Sentiment toward gold has improved during the past week or so. The yellow metal managed to end a run of three-week losing streak last week and has started this one on the front foot, too. After its noticeable rise on Monday, gold was little-changed on Tuesday, but it was pushing higher again today. At the time of this writing, it was trading at $1,265 per troy ounce.
From its low of $1,236 last Tuesday, gold is now up a good $29 or 2.3%. But to put this in some context, the metal still remains a good $92 or approx. 6.8% from its high of $1,357 hit in September. So, it remains to be seen if the metal has managed to carve out a bottom, or whether this is just a retracement before we see further losses as we head towards year-end. The dollar-denominated precious metal has found support from various sources, chief among them is the dollar, which has weakened against a number of currencies amid the lack of any significant news to support it. As it was expected, the greenback failed to find any support from news that the Senate passed a landmark plan for the radical tax overhaul. The bill now needs to be approved by the House of Representatives, due to vote later today, before being signed into law by Donald Trump.
Gold could head higher in 2018 if EUR/USD breaks 1.20 barrier
But it is worth pointing out that the previous significant lows were formed in the month of December in both 2015 and 2016. If history were to repeat itself then we could see another major bottom form this December. One reason this could happen may be if the positively-correlating euro/U.S. dollar (EUR/USD) currency pair exchange rate pushes beyond and holds above 1.20 next year. Economic data in the euro area has improved noticeably and if inflation were to rise further, say as result of higher oil prices – which is certainly possible – then the European Central Bank may have to tighten its belt quicker than the market currently expects. This in turn could help the euro rise further, underpinning the EUR/USD and undermining the Dollar Index.