We believe the market is well supported around current levels – around $1,200 - $1,250 per ounce. There are a number of reasons for this:

  • Physical demand in India and China continues to improve, even though the People's Bank of China (PBOC) has yet to buy gold in 2017;
  • Geopolitics in the Middle East and Korea—along with uncertainty surrounding the U.S. political climate and policy—have created a pervasive nervousness globally that benefits gold;
  • The U.S. dollar appears to be in decline. While this did not help gold in June, we expect the historically negative correlation to benefit gold in the longer term;
  • Positioning in the futures market suggests there could be more buying ahead.

U.S. Dollar Index (DXY) in 2017

Source: Bloomberg

Note: DXY is an index of the value of the U.S. dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies.

About the Author:

Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.