Stock fundamentals like cost deflation across the mining industry, share valuations below long-term average and rising M&A are all supportive of the miners space as well, but those fundamentals could be glossed over if the dollar strengthens.
Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
Gold “has lagged the miners but nearly reached $1250/oz this week. It closed the week at $1236/oz. There is a strong confluence of resistance at $1250/oz and we note the 200-day moving average at $1266/oz. If the rally has a bit more time left then Gold has a good shot to reach $1266/oz. Also, as we noted a few weeks ago, Gold’s performance against the other asset classes will help inform us if Gold can hold onto recent gains or if it’s headed for a big retracement. The bullish scenario would entail Gold maintaining recent gains against foreign currencies and bonds while showing strength against global equities,” notes ETF Daily News.
For more information on the gold market, visit our gold category.