Gold climbed $18 on Friday, why there is more to come

Gold prices rose to a five-week high on Friday in a $18.26 gain to $1157 per ounce. It's the extension of a rally the began with a $25 surge immediately after the soft September US employment report.

It's a welcome move in what has been a frustrating year for gold bulls after a good start. In the first month of the year, the precious metal climbed more than $100 to $1305 but those gains had evaporated by March and in July gold hit a five year low at $1072.

Overall, gold us down 2.3% year-to-date.

This week it's finally showing some life. Here are five reasons that gold will continue to rise:

1) The technicals are turning higher

The main thing is that gold broke, and closed above the September high, albeit marginally. Another factor is the break of the series of downtrends that began in March. In addition, there is a minor inverted head-and-shoulders pattern and the neckline is broken. The measured target of the move is close to $1200 and the June high. Finally, the series of higher lows that began in July is a positive sign.

2) US dollar weakness

Betting on the US dollar has been the trade of the year in the currency market. It broke higher early on hopes for strong economic growth and higher interest rates. The reality hasn't matched the hype yet US dollar positions remain crowded. The dollar has begun to slide and the popular dollar trade could lead to a quick moves to the exits, which will boost the price of gold in US dollar terms.

3) Dovish central banks

The Federal Reserve was supposed to have hiked rates by now, ending the era of easy money that sent gold to all time highs. It hasn't happened and the derivatives market prices a more than 60% chance it won't happen this year. But it's not just the Fed, the European Central Bank is also battling disappointing growth and Japan could be headed towards its fifth recession in the past 10 years.

4) Better emerging market sentiment

The idea that gold is a safe haven is overstated. Aside from times of currency controls or devaluations, emerging market investors don't flock to gold. Instead, it's something that people invest in when they're feeling better about personal or economic prospects. The story of the mini-panic in August was fear about China and emerging markets. That has been dissipating and will help to underpin gold.

5) Production cuts

The major story in corporate mining this month is Glencore. Shares of the company have been on a wild run. They fell more than 30% on September 28 but climbed nearly 110% at the highs on Friday. One of the reasons for the rebound: They shuttered production to cut costs. Glencore isn't a massive gold producer but mined nearly 1 million ounces of gold last year. They have put that part of the business up for sale, according to reports. But more importantly they shuttered mining in some other metals and the market reads that as a sign that other cash-strapped companies may soon do the same.