Continued Economic Expansion and Strong US Dollar Rock Metals Prices

November 30, 2016 - 5:21pm

 by Gary Wagner

Today the Federal Reserve released the Beige Book, a collection of antidotes from business contacts in the Fed’s 12 regional districts. Published eight times a year, the Beige Book is created to aid Federal Reserve members. Most significant from today’s report is the discussion of an economy that is continuing to grow. Today’s report showed that the US economy continues to expand across most regions.

It also demonstrated that retail sales have increased and that the growth outlook is moderate for six of the 12 districts. Seven of the 12 districts reported a tight labor market. The Beige Book also indicated that the strong dollar has created headwinds for some business sectors. This report, coupled with an extremely strong US dollar, and the short-term optimism and sentiment based upon a fresh start in Washington, has put dynamic and extreme pressure on the precious metals markets as a whole.

Today’s report most certainly had an influence on US equities prices, resulting in a mixed bag in which the Dow Jones industrial average closed higher, the Standard & Poor’s 500 closing fractionally lower, and the NASDAQ lost approximately 1% on the day. As of this writing (3:30 EST) spot gold is trading off approximately $16 at 1172, a decline of 1.34%. Today’s decline has taken gold prices to a 10-month low, and remains under pressure, while the US dollar continues to gain strength, trading at a 13-year high.

On a technical basis, gold prices have now returned to a critical level of support at roughly 1170 per ounce. This level, (1170) is a 61% retracement of the lowest low and highest high achieved in 2016. If this critical level of support does not hold, the next technical support level is a 78% retracement of this year’s gold price range, which falls at 1113 per ounce. There is absolutely no doubt that since the presidential election, held earlier this month, we have seen gold pricing decline dramatically. However, where gold pricing might find support is an unknown factor.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

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