Gold finally plays catch up with dollar's long-term decline

• Gold bulls on the stampede above critical resistance.
• US dollar under pressure as Mnuchin hits the trapdoor's lever.

Gold has been a top performer in the wake of the dollar's fresh three year lows and is set for a multi-year breakout as the commodity futures price index surges. On the same tune, spot gold ended the NY session yesterday at $1,341 an ounce while February gold gained $5.00, or 0.45% to end at $1,336.70 an ounce as the highest levels since Jan. 17.

For Wednesday, however, spot gold has made its mark by exceeding the Feb weekly 2013 highs at $1,361.15 with a score of $1,362.38 so far as the NY comes towards a close, (February gold gained an additional $19.60 to close at $1,356.30 an ounce). 

Mnuchin send the dollar into a tailspin

The dollar sank and Gold prices rallied when Treasury Secretary Steven Mnuchin said “a weaker dollar is good for trade,” cementing the case for a lower dollar for longer despite the race to policy normalisation. Coupled with the idea that US inflation is about to take off on a weak dollar policy, the case for higher gold is compelling that has otherwise lagged dollar weakness for over a year.

Gold levels

Gold is now testing the territory above the neckline of a multi-year inverted head and shoulders with price headed to the post-Brexit vote peak and 38.2% of the 2011-15 drop at 1,1380/75. A breakout area which is just above the highs of the July 2016. RSI on the daily sticks is into overbought territory, but only just with more upside to go while pullbacks could be destined for the 10-D SMA located at 1335 on a strong correction, although the price is now above the monthly 100 SMA at 1342 coinciding with June 2014 tops that could come as first major support.