Fed Minutes and Trump Trouble Weaken Dollar and Support Gold

A combination of factors collectively have had a net positive effect on the pricing for gold futures today. The most prevalent factor moving gold prices higher today was dollar weakness. Now, for the fifth consecutive day, the dollar has lost value as it trades against a basket of foreign currencies.

As of 4:00 PM Eastern standard time, the dollar index is currently trading off by 2/10 of a percent, which is down 19 points. For the first time in a week, the dollar is trading back below 95 and is fixed at 94.96.

Today the Federal Reserve released minutes from the last FOMC meeting in which they conveyed support from the majority of members for another interest rate hike in September. Currently, the CME’s FedWatch Tool is predicting a 96% probability that a rate hike will be initiated next month. This potential rate hike is based upon data indicating strong economic growth.

However, members voiced concerns surrounding the current trade disputes and the potential negative impact that these disputes could have on the U.S. economy.

The minutes also indicated that Fed officials are in unison in regards to changing the language that describes their current monetary policy. They agreed that they would need to remove the word “accommodative” ‘fairly soon,’” in that recent interest rate hikes have moved the Federal Reserve’s monetary policy closer to a neutral stance than an accommodative stance.

Potential turmoil for President Trump also weighed heavily on some traders. According to Jim Wyckoff of Kitco News, “Wednesday saw some trader and investor anxiety as Trump is in some hot water. Two of his close associates are likely going to jail. This has added a bit of uncertainty to the world marketplace at mid-week. There is talk Trump could pardon those associates, or that he could be impeached. And the mid-term congressional elections are right around the corner.”

Gold futures are currently trading at $1,202.90, a net gain of $2.90, this basis the most active December Comex contract. Of crucial importance is the fact that gold once again is trading above $1,200 per ounce, a key psychological level. If gold futures can manage to stay above this critical price point, $1,200 should once again become an area of price support rather than its recent position as an area of resistance.

Our technical studies indicate that current resistance resides between $1,213 to $1,218 per ounce. During the majority of July and the beginning of August, price action traded just above $1,218 per ounce for approximately five weeks. This puts this level as an evident former support level that is currently where major resistance resides.

Wishing you as always, good trading,