Dollar Strength and Selling Pressure Weigh Heavily on Gold Pricing

Gold is trading under pressure today, resulting in a $10 decline. As of 4:00 PM Eastern standard time, gold futures (April futures contract) are currently off by $11.10 (-0.82%).

Physical gold is also under pressure, currently trading off by $9.20. Today’s decline is the result of a combination of U.S. dollar strength as well as selling pressure. According to the Kitco Gold Index, today’s decline of $9.20 is a result of dollar strength accounting for -$4.70, with the remaining -$4.50 directly attributable to selling pressure.

Gold prices traded to $1353.60 last night in overseas trading. However, dollar strength along with profit-taking bid the precious yellow metal lower. This seems to be in response to the easing of tensions between the United States and China regarding tariffs and a potential trade war.

Today’s price decline was also in response to yesterday’s dramatic gains witnessed in U.S. equities. The Dow Jones Industrial Average scored its third largest point advance ever as it closed 669 points higher on the day. That, however, seems to have been short-lived with today’s complete reversal, which is more in line with last week’s dramatic 1100-point drop on Thursday and Friday.

An interesting facet of today’s trading activity is that although U.S. equities fell under dramatic pressure and reduced the risk-on market sentiment prevalent yesterday, safe-haven assets did not react favorably as gold continued to trade under pressure as stocks sold off.

The Dow closed at 23,857 today after losing 344 points, which is a 1.43% decline. That decline was dwarfed by the dramatically lower pricing in the tech sector in which the NASDAQ composite lost 211.85 points, which is almost 3% (-2.93) to close today at 7008.69.

Should the selling pressure continue into the week, we could see a dramatic reversal in the recent selling pressure evident in safe-haven assets such as gold. While the initial downturn in U.S. equities could pressure all asset sectors as traders and investors scramble to cover losses, inevitably a significant decline in U.S. equities will result in gold returning into favor.

Wishing you as always, good trading,