Gold futures continued to push towards the highs of mid-2016 and threatened to break out to levels not seen since 2013 last week in response to a weaker U.S. Dollar.

April Comex Gold futures settled at $1357.20, up $19.20 or +1.43%.

Gold hit a 17-month high earlier in the week after a U.S. government official said he may support a weaker dollar. However, prices were hit hard the next day after President Trump said that he wanted a “strong dollar.” By the end of the week, gold was in a position to resume its uptrend.

On Wednesday, Mnuchin triggered a steep break in the Greenback when he said that a weak dollar was good for U.S. trade. But when given the opportunity to clarify his comments at the World Economic Forum early Thursday, Mnuchin did not latch on to the strong U.S. dollar rhetoric used by past Treasury secretaries.

Mnuchin said during a CNBC-moderated panel that the dollar can fluctuate and he is not concerned by the current weakness, but “in the longer term” believes in the “strength of the dollar.”

Mnuchin’s comments were bearish for the dollar, but bullish for dollar-denominated gold.

Comments from U.S. President Donald Trump helped turn the dollar around with hawkish comments, saying he wanted a “strong dollar”, contradicting earlier comments made by Treasury Secretary Steven Mnuchin. Trump told CNBC in an interview in Davos, Switzerland, that he ultimately wants the dollar to be strong.

This statement was enough to spook the short-sellers and encourage aggressive short-covering initially, however, the move didn’t last with gold making an almost full recovery from its previous day’s sell-off to close at nearly its highest level for the week.

Forecast

The price action this week will once again be controlled by the direction of the U.S. Dollar. The dollar will be largely influenced by President Trump’s State of the Union speech on Tuesday, January 30 at 9:00 Eastern (0200 GMT Wednesday). Once again, a weaker dollar will be bullish for gold and a stronger dollar bearish for gold.

Traders should expect Trump to talk about the positives in the economy. This may trigger a strong recovery in the dollar, at least over the short-run. This would be bearish for gold.

The Fed will issue its monetary policy statement on January 31. The central bank is not expected to raise interest rates. Traders will be looking for the Fed’s assessment of the economy, inflation and its outlook for future rate hikes.

Finally, investors will also get the opportunity to react to the latest data on employment in Friday’s U.S. Non-Farm Payrolls report. The headline number is expected to show the economy added 184K jobs in January, up from 148K in December. Average Hourly Earnings are expected to increase 0.3% and the Unemployment Rate is expected to remain at 4.1%.