Gold has enjoyed a very good week and is poised to finally break out of the trading range it has been locked in since early spring. Since last Wednesday, the precious metal has enjoyed gains of about 1.5%, from just above the $1,270 level to above $1,290 where we are at now. It has now gained more than 10% in 2017. While the yellow metal must still break out above the $1,300 mark to confirm this bull market, all signs remain positive that this will happen.
After receiving a bump in price from geopolitical tensions with North Korea gold settled back a bit when that situation eased. It resumed its climb late last week and early this week primarily on economic factors and dollar weakness.
Tuesday saw gold briefly trade above $1,300 until dollar strength returned, backing it off to the $1,290 area. This action reinforces the idea that the gold price is currently being driven far more by basic fundamentals than exterior political fear or doomsday scenarios. This will prove critical as the summer winds down and several serious economic issues are confronted this fall.
The remainder of this week and the beginning of next we will be focused on two things, the gathering of central bankers at the Jackson Hole Economic Policy Symposium and the PMI data. The PMI data will be important as the Federal Reserve continues to try to thread the needle between returning to "normal" interest rates and balance sheets without sending the economy into a recession.
Jackson Hole is important because both Fed Chair Janet Yellen and European Central Bank President Mario Draghi are set to give speeches. Their thoughts on the direction of interest rates as well as monetary policy are key as the Fed and ECB take on the enormous challenges of debt and slow growth in Europe and the U.S. With many indicators signaling a worsening economy and both sovereign and private debt at record levels there is less and less room for a misstep.
Another interesting area this week is mining stocks. These stocks have been out of favor for some time and trading at low levels relative to both the general market as well as the price of gold and silver. The miners seem to have put in the lows and have finally begun to trade higher, if only marginally. If the gold price holds above the $1,300 level many of these mining names will be carried along for the ride.
Although mining stocks pose many challenges in pricing, with a strong move up in the fundamental price of the metals, combined with the relatively cheap entry point now, it may be time to take a serious look at these stocks.