Why the Gold Price Is Bouncing Back

"Over the past three weeks, gold has come to terms with its strong gains between August and February, with the metal's price peaking on Feb. 20 at $1,346. From the August low of $1,175, that produced a striking gain of $171, or 14.6%. Since that February peak, gold has dropped back by about $60 to $1,286, giving up a total of 4.5%.

"This correction in the gold price has been an almost perfect negative correlation with the U.S. Dollar Index (DXY), with about a five-day delay. Looking at the action in the dollar, we can see that the DXY bottomed a few days after gold's February peak, and may have peaked just after gold's recent low.

"But even as gold has corrected, its recent price action suggests that correction may have already hit a low... So far, gold's March 7 low has held above its Jan. 24 low, providing for a bullish higher low pattern... I believe we've seen the bottom of this gold correction. What's more, if you consider the seasonal patterns of gold's behavior, we could be in a sweet spot right now.

"Looking at gold's bull years since 2001, it typically bottoms in mid-March, then starts on a spring rally through until the end of May... this potential rally has the ability to push gold above its February high near $1,340 by then. If gold can close above that level, then its previous high of $1,350 (last April) will lie within close reach.

Stronger Indicators for the Price of Gold in April

"... the dollar's direction is anything but clear at this point. The DXY remains above its 50-day moving average, and both the relative strength index and moving average convergence divergence have been trending higher since early January.

"... this doesn't seem to have gotten in gold's way, as gold prices have continued to rally in the face of a stronger dollar. That has been a bullish omen for gold in the past. With the gold price back above its 50-day moving average, it's possible that $1,300 will now become a new support level. If indeed the gold correction is over, it will have been relatively short, barely lasting three weeks.

"... on a fundamental basis, there are positive signs that gold is set to continue climbing higher this year..." ("Here's Why the Price of Gold Will Keep Going Up in 2019," Peter Krauth, Money Morning, 03/15/19.)