Dollar Caps Respectable Gains This Week In Gold

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Even with gold prices lower today, my belief is that we will see prices advance towards the end of the year, which will be followed by very respectable gains in 2019. After surging more than $20 yesterday, gold futures basis the most active February contract is currently trading off by approximately $9.30 and fixed at $1,258.60.

One positive note is that even with today’s decline of over nine dollars, current pricing is still above the 200-day moving average. This could be indicating that gold is moving into a long-term bullish trend.

Price declines witnessed today in gold are wholly based upon dollar strength in both the futures and spot markets.

Based on the information available from the KGX (Kitco Gold Index), dollar strength actually added $7.80 to today’s decline. However, once we factor in moderate buying which amounted to a gain of $3.30, as of 5:00 PM Eastern standard time, spot gold is currently fixed at $,1254.90.

Today’s strong dollar is occurring even in light of an extremely high probability that the U.S. government will have a partial shutdown which will happen within hours if current negotiations cannot bear any fruit.

Dollar strength is a result of data suggesting not only economic strength but also economic growth. The consumer department revealed today that U.S. consumer spending grew at a faster pace than income in November. There was also the University of Michigan’s consumer sentiment gauge to consider, which showed a final December reading of 98.3, which beat market forecasts of 97.2.

Reports are indicating that the U.S. economy grew at an annual pace of 3.4% in the third quarter which was revised from the initial number of 3.5%. However, a MarketWatch survey of economists is forecasting that the gross domestic product will slow to a rate of 2.6% annually in the fourth quarter.

While it is true that these numbers indicate that the U.S. economy is strong and continues to grow, there are potential bumps in the road ahead that could, in fact, change the pace at which the economy grows next year.

First and foremost is the absolute impasse in funding the budget of the United States and paying government employees which seems to be breaking down and is less likely to be resolved before Christmas.

Secondly is the current trade war between the United States and China. Without a concrete and lasting resolution to these issues, both countries could experience detrimental forces dramatically affecting both countries GDP.

Lastly, President Trump and his current administration could face tremendous upheaval as more and more information is revealed from the current Mueller investigation about the real potential that there was wrongdoing by the president and members of his staff. These offenses could be as minor as inappropriate use of campaign funds, and as major as proof of Russian collusion between the administration and Russia during the election of 2016.

Any of these factors could dramatically influence the current pace at which our economy grows, and influence substantially the desire by investors to seek safety in haven investments such as gold.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer