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.
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