- By Alberto Abaterusso
Gold for immediate delivery closed week five at $1,215.20 per troy ounce on the London Bullion Market, down $6.75 per troy ounce from the previous trading day when the precious metal closed at $1,215.20.
Except for this small dip, week five has been characterized by an uptrend in the gold market.
Gold rose $23.20 per troy ounce from $1,189.85 on Jan. 30 to $1,213.05 on Feb. 3.
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The intrinsic value of ABX
Source: Kitco.com
Since the beginning of the new year, gold is trending up on the LBM as shown by the graphic below:
Source: Kitco.com
During week five, we have witnessed two major jumps in the price of gold.
The first one was on Jan. 31, when gold went up nearly $20.00 per troy ounce on the LBM as the U.S. dollar dropped. Following the news about President Trump's suggestion to have a weaker dollar versus other currencies as a manoeuvre to stimulate U.S. exports, the DXY index fell 0.92% and closed at $99.51, a whisper away from the lowest price of $99.23 on Feb. 2.
The second jump on the LBM was on Feb. 2, when gold bounced up $14.05 per troy ounce at the end of the morning's negotiations, and $18.30 at end of the afternoon's trades.
What made gold continue its uptrend since the beginning of 2017 was the increase in the gold investment demand in response to a higher inflation seen by U.S. households, which is synthetized in a drop of the Consumer Confidence Index released by the U.S. Conference Board last week.
Bloomberg writes that U.S. households perceive a "higher inflation and interest rates over the coming year."
According to the U.S. Conference Board's report, the present situation index, which synthesizes households' answers to two questions related to present economic conditions, increased by 6.2 points, from 123.5 in December to 129.7 in January. The expectations index, which synthesizes households' answers to three questions about future expectations, fell 6.2 points from 106.4 in December to 99.8 points January.
This situation that promotes rising gold price will continue as the Fed keeps postponing the hikes in interest rates and U.S. households continue to see a future characterized by higher inflation with pessimism.
Concerning forecasts on gold, "contributors are predicting that the gold price will average $1,244/oz in 2017, 5.3% higher than the first half of January 2017, but broadly in line with the actual average price in 2016," writes Market Slant. The average price of gold for 2017 as estimated by analysts ranges between a low of $1,110 and a high of $1,350.