Dollar strength and U.S. equities under pressure are supportive of gold and silver

Considering today’s extremely strong U.S. dollar, coupled with a major decline in U.S. equities, the fact that both gold and silver are trading higher on the day is extremely impressive. Currently the dollar is up just over 0.75%, which is a net gain of 70 points, taking the dollar index to 93.425.

As of 3:48 PM EST gold futures basis the most active December contract is trading $6.70 higher, a net gain of +0.34%, and fixed at $1940.70. The most noteworthy aspect of today’s trading range was the low which occurred earlier in the trading session when gold futures traded to a low of $1911.70 before recovering. The 50-day moving average for gold futures currently resides at $1912.50. This indicates at least on a technical basis that there is solid support at the 50-day moving average. It also indicates that in terms of short-term market sentiment it remains solidly bullish as long as gold can remain above that key level of support.

Silver futures are also exhibiting moderate gains on the day. Currently the most active December 2020 contract of silver is at $26.825, which is a daily gain of about $0.12, or +0.44%. The only precious metal trading lower on the day is palladium which is currently down by 1.54% and fixed at $2,307.00.

On many occasions when U.S. equities have a meltdown like today, gold and silver prices would be dragged along with them lower. As many traders liquidate holdings to cover margin calls.

The NASDAQ composite lost -395 points (-3.49%), and is at 10,917.90, with six minutes left in trading. The S&P-500 sustained a drawdown today of -2.23%, and after factoring in a decline of just over -79 points sits at 3,347.77. The Dow Jones industrial average is down well over -2% and is presently at 27,520.98, after factoring in today’s decline of well over -600 points.

On a technical basis we currently show support for gold futures at $1,912.50 the 50-day moving average, and major support at $1,900 per ounce. Short term resistance occurs at the high achieved today, which was at $1,948.30, with the next level of resistance occurring at $1,975 per ounce, and major resistance occurring at $2,000.

Our technical studies also indicate the first level of support for silver occurs at the 23% Fibonacci retracement level at $25.66, with major support occurring at $25 per ounce. The first level of resistance in silver occurs just below $28 at $27.85.

Considering dollar strength, all the gains seen in gold and silver today are 100% due to market participants bidding the precious metals higher.

Wishing you as always, good trading and good health,