Three Major Reasons for a Bullish Gold

Posted Monday, March 27, 2017 by
Arslan Butt • 1 min read

No surprises, the yellow metal Gold is trading bullish after having an upside breakout at $1254, and it's likely to target $1260. Undoubtedly, the ongoing tensions in the United States, Eurozone, and the U.K are increasing demand for the haven asset.

Firstly, the Gold trading is bullish as the U.S dollar is still weak. Perhaps the market has already priced in the upcoming rate hikes by the Federal Reserve. It's as if we already know that they have nothing new to offer us and we have already traded on the 3 times rate hike sentiments.

Secondly, the positive manufacturing and services PMI figures from the Eurozone released on Friday are another reason for weakness in the dollar index.  Let me share that the dollar index, which is a measure of dollar strength against 6 major currencies, is impacted heavily by the Euro's strength.  This is because the single currency Euro has the highest weight in the dollar index. Consequently, the strength of the Euro weakens the dollar index.

Thirdly, the uncertainties caused by Article 50 of Brexit are weighing on the stocks and forex market. Theresa May, the acting Prime Minister of the United Kingdom, said that she will trigger Article 50 on Wednesday, March 29.  If this Article 50 of the Lisbon treaty is new to you, I suggest you go through our article entitled Simplified – Article 50 of the Lisbon Treaty to Brexit to understand it's importance as we are likely to see some action on March 29 and even before that due to sentiments. So buckle up and trade safely with stop loss! 

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