Gold continues to rally

The six-week gold price rally has, if anything, picked up speed rather than petering out.

Gold is still in a downward trend overall that stretches back for a year, with the precious metal 28% off its high from last year. However the last six weeks have seen a resurgence in the metal and it is 13% off its lows from a month and a half ago.

This week has seen the spot price break through the 50-day moving average, and today it has flirted with breaking through the 100-day moving average.

The price action that gold has been showing of late will probably entice a few of the momentum traders back into the arena, but as with equities the summer months do see thinner volumes of trade and as such movements can become a little more exaggerated.

Another aspect that will be playing its part is the weakening of the US dollar against sterling – as a barometer it has dropped 700 pips in a similar timeframe to the current upward move for gold. How much of this move can be attributed to an exhaustion of selling power and how much to a change in sentiment towards the US dollar is difficult to judge, but it would be fair to say both have played their part.

Spot Gold (DFB) chart

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