Gold Price in 2017 Surges On Rising Syria And North Korea Tensions

April 16, 2017

The gold price in 2017 has pushed through resistance levels this past week. It has rallied to its highest level since November 2016.

But will gold prices sustain their newfound heights?

The good news: Seasonally, the price of gold is entering a strong period that, on average between 2001 and 2012, has seen gains of almost 4% between early April and late May.

If you combine that with US tensions with Syria and North Korea, investors have plenty of reason to expect gold to power higher.

But gold's recent move through its stubborn 200-day resistance level of $1,260 may cause headwinds for the metal.

Today, I'll discuss those potential headwinds and how much higher I expect gold prices in 2017 to rise.

First, let's take a look at the strong performance from the metal last week.

Price Of Gold Posts A 2.7% Weekly Gain

After settling at $1,254 on Friday, April 7, gold prices opened Monday morning lower at $1,249. This drop suggested that the U.S. missile strike on Syria was overblown. Prices recovered slightly by the close and settled flat at $1,254.

On Tuesday, April 11, gold once again shot higher as investors grew concerned about U.S. action in Syria and incendiary rhetoric toward North Korea. At the same time, the U.S. Dollar Index (DXY) retreated on weaker Treasury yields and a stronger yen. The gold price closed the day at $1,274 for a 1.6% rise.

Here's how the DXY trended this past week.

Wednesday saw the biggest action in the dollar and gold price. The Wall Street Journal interviewed President Donald Trump, who said the dollar was "getting too strong." That news sent gold higher and the dollar lower, falling 60 basis points in just 40 minutes. The price of gold settled at $1,287 for a 1% gain on the day.

Yesterday (Thursday, April 13), gold opened at the previous close of $1,287. But by mid-morning, the dollar's overnight retreat had abated and the DXY started to rebound. The metal managed to close 0.1% higher at $1,288. That's the highest level since before the election on Nov. 4, 2016.

With US markets closed Friday (April 14) for Good Friday, gold’s performance handed investors a weekly gain of 2.7%.

Does this recent popping action place gold in a new higher realm?

Maybe, but I'm not convinced yet that the geopolitical uncertainties and Trump's rhetoric about the dollar are enough to sustain recent gains. Perhaps gold will head a little higher still, but there's major overhead resistance at $1,300.

Taking all that into account, here's what I see gold doing next:

Gold Price In 2017 Will Hit These Levels

I could see gold testing the $1,300 level…then pulling back to $1,260.

One of the reasons I remain unconvinced that this rally will continue is a week ago Friday’s bearish technical reversal. That’s when the price of gold traded intraday past its 200-day moving average…but pulled back to close the day below that level.

This chart shows the 200-day moving average, indicated by the red line.

Of course, this depends on how long the situations in Syria and North Korean pan out. If geopolitical tensions remain high in 2017 and the dollar keeps falling, then gold prices could easily maintain current levels and push higher.

But on a fundamental basis, there’s no news like major buying from a central bank or heaving national imports that can support the current rally.

And if the aggressive rhetoric calms down in the Middle-East and in East Asia, then gold could retreat to $1,260 once again.

Overall though, I don’t expect to see any major weakness. I still project gold prices to rise another 8.7% from the current $1,288 level to $1,400 by the end of 2017.

Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in energy, metals and mining stocks. He has been editor of a widely circulated resource newsletter, and contributed numerous articles to Kitco.com, BNN Bloomberg and the Financial Post. Krauth holds a Master of Business Administration from McGill University and is headquartered in resource-rich Canada.

The purity of gold is measured in carat weight.

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