Gold Futures Come Back from Lows to Close Over $1,200

Although gold futures closed higher for the first time in the last three sessions, any gains realized today were fractional at best. As of 4:00 PM Eastern standard time, December Comex gold futures are currently fixed at $1,201.30, which is a net gain of $1.50 on the day. It was the low achieved in trading today, and the ability for traders to bid the precious yellow metal off of $1,292.70, the low of the day.

Spot gold is currently trading up by $0.60 on the day, fixed at $1,196 per ounce. The components moving the market higher today are the exact opposite of what we saw yesterday with dollar strength providing headwinds amounting to $0.95 of lower pricing, after adding the gains today due to normal trading, which was $1.55, the net change on the day is just a little over half of a dollar.

There continues to be a matrix of underlying currents affecting gold pricing. They include the current trade conflict between the United States and China, higher interest rates as the federal reserve continues to ramp up its monetary normalization policy, and a strong U.S. equities market.

However, the key to understanding all of the factors which are currently at play we need only look at the U.S. dollar because it is the dollar that becomes the economic barometer by which we can gauge all of these factors combined.

As reported by MarketWatch today, analysts at Zaner Precious Metals wrote, “The threat of further escalation in the trade wars between the U.S. and China has gold bulls nervous despite the oversold condition of the market. The general viewpoint that the U.S. has less to lose in the standoff has supported the dollar and pressured the metals.”

In that same report, Colin Cieszynski, chief market strategist at SIA Wealth Management said, “Even with all of the uncertainty out there, investors appear to be more interested in using U.S. dollar assets as a haven rather than gold or the [Japanese] yen.” 

The combination of a strong dollar and tepid interest in the safe haven asset class continue to put pressure on gold. Before gold pricing can stabilize, form a base, and recover there needs to be a shift in the fundamentals that are driving prices lower. As long as interest in the U.S. dollar remains solid, and there is little interest in gold as a safe haven asset, gold pricing will continue to trade under pressure.

Wishing you as always, good trading,