- On March 6, 2017
Typically, gold and the US dollar move in opposite directions. Dollar up, gold down. Dollar down, gold up. But even as the dollar remains strong, gold is showing strength at the same time, appearing to brush off the bang of the buck.
The reason, says Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, is worry. “Ongoing uncertainty on multiple fronts is triggering a rise in demand for safe-haven investments such as gold and silver,” Hansen says.
Uncertainty over the outcome of elections in Europe, which have seen strong gains in the polls for populist anti-EU candidates, play to precious metals’ favor, Hansen states.
“Into this uncertainty we are continuing to see a pick-up in demand for alternative investments such as gold and silver. In January, it was increased uncertainty about the impact of the new administration in Washington that gave precious metals a boost. Since then, worries about Europe have added another layer of support and this has so far resulted in year-to-date gains for gold of 8% and 12.5% for silver,” he said.
“Gold has settled into a range determined by the 38.2% and 50% retracement of the July to December sell-off,” Hansen added. “We maintain a bullish bias, with the market likely to target $1,278/oz on a break. Support remains firm at $1,220/oz, which also coincides with trendline support from the December low.”