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Gold Breaks above $1,350: What’s the Next Level to Watch?

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Jun. 14 2019, Updated 1:48 p.m. ET

Gold’s price movements

Gold investors’ fortunes have turned rather quickly in the last few weeks. Due to strength in the stock markets, gold wasn’t gaining many bids during the early part of the year. However, President Donald Trump’s tweet on May 5, which revived trade tensions, helped revive gold’s safe-haven appeal. Since May 5, the SPDR Gold Shares ETF (GLD) has risen ~5%, and the VanEck Vectors Gold Miners ETF (GDX) has risen 14.5% compared to the S&P 500’s (SPY) fall of 1.5%.

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Gold breaks above $1,350

On June 14, gold broke the key level of $1,350 per ounce and jumped 1.2%, marking the first time since April 2018 that the metal had broken above this level. Most recently, geopolitical tensions have ratcheted up following the US’s blaming Iran for attacking two oil tankers in the Persian Gulf. The tensions between the two sides have soared in recent weeks and could worsen going forward. This unrest has been one of the main reasons investors have sought the safety of gold.

Another piece of news that helped gold break above the key level was disappointing Chinese data. China (FXI) recently released its industrial production growth data, which came in at 5%, below expectations of 5.5% and also a 17-year low. Its fixed asset investment grew 5.6% in the first five months of the year compared to the expectation of 6.1%. These data points added to the market’s fear of a slowdown in China amid the ongoing US-China trade war.

The next key level to watch

The $1,350 level was key for gold, as it kept approaching it and backing off. Now that it’s successfully breached this level, expectations of its extending the bullish pattern in the short term are high. Investors should watch out for follow-through on this upward movement to confirm a bullish breakout of the trend. The next resistance level for gold could come in at $1,375 per ounce. Investors should also keep an eye on the US Dollar Index (UUP), which has strengthened amid rising geopolitical tensions. A higher greenback tends to weaken the demand for gold.

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