Dollar strength and a recovery in equities move gold lower

It was a combination of an exceedingly strong recovery in U.S. equities and the dollar index gaining over a full percent that put enormous selling pressure in the precious metals complex across-the-board. Yesterday the Dow had its largest one-day decline since the 2008 financial crisis.

Today the Dow had a remarkable recovery gaining almost 2000 points (+1985), resulting in a gain of 9.36%. This took this week’s 20% decline in the Dow down to a 15% decline. At the same time the U.S. dollar index gained 98 points taking it back to 98.445. The net effect was the precious metals markets selling off dramatically.

Today’s dramatic 2000-point gain in the Dow was in unison with the NASDAQ composite which gained 9.65%, and the S&P 500 which gained 9.5% According to Reuters this rally was a direct result of investors “setting their hopes on more global fiscal stimulus to stem a corona virus driven global recession.”

As of 4:21 PM EST gold futures basis the most active April contract is currently trading down by 4.43%, which is a $70.40 decline on the day fixing April futures at $1520.10.

Physical or spot gold is experiencing the same deep decline today. Currently gold is fixed at $1521.40, which is a net decline of $54 on the day. Although today’s decline is a combination of dollar strength and market participants bidding the precious yellow metal lower, according to the KGX (Kitco gold index) it is primarily selling that has caused the majority of today’s decline. Dollar strength is accounting for $18 of today’s decline with the remaining $36 directly attributed to selling.

However, it is palladium which had the largest percentage decline of any of the precious metals today. Currently palladium futures are down almost 12 ½%, which amounts to a decline of $238.20 per ounce taking precious metal to $1,676.60. In fact, this week palladium broke below its 50-day moving average for the first time since September 2018.

Silver is in second place in terms of the largest percentage drawdown today, giving up 8.6% on the day, resulting in a decline of a $1.39 and taking silver to $14.61. In fact, it was platinum that had the least percentage decline of 2.15%, resulting in a $16.80 decline taking platinum futures to $765.

The good news is that it is Friday and traders, analysts and market participants will now have the weekend to recuperate, with one caveat it is Friday the 13th.

Wishing you as always, good trading,

Gary Wagner