Happy New Year and all the best for a happy, healthy, and prosperous 2019. Gold, the yellow metal with a long history as a financial asset and a commodity, did a lot better during the final month of 2018 that ended on Monday, December 31 than it experienced during the last month of the year from 2015-2017.
As the weekly chart highlights, gold hit a low at $1046.20 in December 2015 which turned out to be the bottom after the decline from the 2011 peak at $1920.70 per ounce.
After reaching a high at $1377.50 in July 2016, gold corrected and hit a low at $1123.90 in December. Gold then reached a lower high at $1358.50 in September 2017 before falling to its December bottom at $1236.50. In the year that just came to an end, the price of the yellow metal peaked at $1365.40 in January and April and then corrected to a low of $1161.40 in mid-August. The bottom for the precious metal came nearly in 2018 as the price recovered to close the year at over $1280 per ounce. The 50 percent retracement level of the move from the January and April peaks and the mid-
August low stood at $1263.40, and gold closed the year above that level. In another sign of strength, gold moved to the upside in spite of a strong dollar that remained a lot closer to the highest level of 2018 than the low. A stronger dollar could not keep the price of gold down since it recovered from the lows in mid-August, and as we head into 2019, the path of least resistance of the price of gold remains higher.
Gold is a barometer of fear and uncertainty in markets. We head into the New Year after a period of increased volatility in the stock market. The Fed remains on a hawkish path, trade issues between the U.S. and China continue to threaten global economic growth, and political discord within the United States is likely to grow given the Democratic majority in the House of Representatives and the upcoming 2020 Presidential election. The markets are waiting for the next shoe to drop from the investigations by a special prosecutor in Washington. The bottom line is that these issues and many more around the globe have contributed to gold’s recovery and ascent. As we head into the New Year, the area of critical technical resistance for the gold market stands at the July 2016 peak at $1377.50 per ounce. Time will tell if the end of the December curse in 2018 is a sign that gold is ready to make a move to a new level on the upside in 2019.
In another sign of strength for the gold market, silver moved to the upside above the $15 per ounce level at the end of December. Silver had been lagging gold since August and did not make its low for the year until mid-November when the price of the more volatile precious metal fell to $13.86, the lowest price since early 2016. However, silver’s recovery and move to over the $15.50 level at the end of 2018 is another supportive factor for the path of least resistance of the gold market as we head into the uncertainty of the new year.