Dollar Rise Drags Gold Down. Regular Traders Try To Pull It Back Up

Currency fluctuations again are helping to drive prices in the precious metals markets. Gold is resisting the force through up-trending regular trading but silver is having no such luck.

The U.S. dollar is up against most major currencies, the euro the most important as we eye gold prices. However, also of great interest is dollar strength against the yen and Swiss franc, customarily considered haven plays. This is interesting because gold, obviously also a haven instrument, is trading higher when regular trading is considered in isolation from dollar strength.

Today, we can’t blame the Federal Reserve for any of the currency movement but rather have to turn our sights on the European Central Bank. The euro fell to a four-month low against the dollar on Thursday, which helped the U.S. dollar index rise to a seven-month highs, after President Mario Draghi of the ECB said the bank did not even discuss ending bond purchases. The ECB also did not discuss ending its asset-buying program or nor extending it.

While Draghi’s comments and observation were not deeply dovish, they were soft enough to signal the market that Europe is going to stay the course on rates, QE, and bond purchases for a while.

Equities are maintaining their prices at nearly even, despite the fact that West Texas Intermediate crude plunged 2.00% today. Wall Streeter’s are optimistic about the still-fresh earnings season. Today, American Express contributed the most to the DJIA’s non-loss day. Earnings will be the fiddler calling the tune for a week or two.

There is less uncertainty about the U.S. election but equities (and certain other markets) hate uncertainty. Of course, haven investors generally enjoy volatility. A snapshot from 10,000 feet – the VIX volatility index – tells us anxiety and fear has been subsiding. It’s heading for 14.00 on the gauge.

Interestingly, the probability of an interest rate hike popped up on the CME’s FedWatch measuring stick. Traders/bettors now put it at an almost 70% likelihood.

In this wacky season, though, even with renewed perceptions that the FOMC meeting in December will bring a baseline interest rate hike, the yield on the U.S. 10-year bond just slipped to 1.75%. Just last week on October 14th, the yield was seriously probing the 1.80% level, which it did not breach.

We may be in a holding pattern in a few markets for the next few weeks, at least.

Wishing you as always, good trading,