Dollar Weakness Not Enough To Sneak Gold Past Trader Driven Losses

Despite a serious assist from U.S. dollar weakness, gold fell again today, embedding itself deeper into its seemingly unbreakable long-standing range.

Mixed data from the U.S. Department of Labor on weekly unemployment claims didn’t help. They fell slightly more than was anticipated. On the other hand, the four-week running average is as low as it’s been since the year 2000.

Also hampering gold’s rise is a habit that has become destiny. Profit takers are grabbing their share of gains when the price gets near the top of the range.

"We had a good run up and every rally is seen as an opportunity to take profits ... the market remains elastic, good buying on the dips and selling on the rallies, we have been doing this for the past 18 months," Ross Norman, CEO of broker Sharps Pixley, said.

On top of that, while Greece is still hanging fire, it seems as if a very short-term deal is going to be worked out so that the country won’t default on IMF payments due on June 5th. The presidents of Germany and France are to meet with Greece’s prime minister in Riga, Latvia, today and tomorrow. Another deadline on debt arrives at the end of June.

The slight ray of hope helped to lift the euro against the dollar.

Crude is acting schizophrenically, pushing higher on inventory draw-downs but being pushed lower by static or declining demand in China. In fact, demand is tepid in most of the world, the summer driving season in the Northern Hemisphere notwithstanding.

The dollar was weaker against the euro on a number of news points besides the temporary mitigation of the Greek crisis. There was more robust growth in the core euro zone, which includes Germany, France, Belgium, the Netherlands and northern Italy. The spread between the German bund (bond) price and U.S. treasuries narrowed further. And there is a certain reluctance for investors to take long positions on an already-high-priced greenback.

However, limiting those euro gains in the future will be a very accommodative stance by the European Central Bank via its qualitative easing program. That naturally means the dollar will creep higher again, possibly soon.

The sum of the above? Gold will struggle in its range as no solid, long-term trends in other markets and in general economic outlook is present. The world’s economies are like horses bobbing up and down on a carousel.

Wishing you as always, good trading,