Gold is on pace for its best month since February, rising nearly 2 percent in July as the U.S. dollar weakens. And some strategists are forecasting further upside for the asset typically seen as a safe-haven play.
Gold futures rose in Friday trading to a six-week high of $1,276.60 per troy ounce, extending the gains it made Thursday following weaker-than-expected inflation data and a second-quarter gross domestic product reading that was in line with expectations.
In a technical sign of strength, gold is now trading well above its 50- and 200-day moving averages.
"We see a little bit of a wake-up in risk," said Max Wolff, market strategist at 55 Institutional, who believes the yellow metal will see more of a bid going forward.
"This particular runup may be short-lived, but the long-term trend in gold is probably positive," he said Thursday on CNBC's "Trading Nation." "I think risk is rising, and I think the sort of risk-free double down on risk assets period is probably over."
On Thursday, DoubleLine Capital CEO Jeffrey Gundlach told Reuters that he has exposure to gold, and forecast that gold would rise as "gold looks cheap compared to markets that have rallied a lot, including bitcoin and including Amazon."
In a note to clients Friday morning, Rhino Trading Partners chief strategist Michael Block wrote about the influential investor's outlook on gold.
"Jeff was also talking about how gold is coiling — I agree and think it could be a flight to safety play — enough so that we are long a couple of precious metals stocks," he wrote.
Gold was trading slightly higher on Friday, at $1,268.70 per troy ounce. The yellow metal has "a lot to go on the upside" if relative weakness in the U.S. dollar persists, wrote Pete Boockvar, chief market analyst at The Lindsey Group. In a note to clients Friday morning he pointed out that speculators' net long positions in gold are at the lowest in 18 months.
On the other hand, the activity in gold may simply be an "anti-dollar play," said Boris Schlossberg of BK Asset Management.
"The dollar getting weaker makes gold stronger. If we get any kind of juice out of the U.S. economy, and any kind of positivity on the Fed raising rates, I think gold deflates just as it has over the last couple of years," Schlossberg said Thursday on "Trading Nation."
"So I'm not really an all-out bull on gold at all," he said. "I'm neutral on it at this point, mainly because I really don't know if we do get any kind of rally in the dollar."
Indeed, as the dollar loses value, it tends to cost more dollars to buy the same amount of gold — so the two assets enjoy a strong inverse correlation. Since Fed rate hikes tend to help the dollar, they should tend to hurt gold.