Gold and silver trade dramatically lower, as $2,000 remains resistance

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Gold and silver both traded dramatically lower as market participants focused upon risk-on assets with stocks globally moving higher, this includes indices in the United States closing at new all-time record highs. The NASDAQ composite gained 116 points, and is currently fixed at 12,056.44. The S&P 500 also closed at a new record high after gaining 54 points in trading and is currently fixed at 3,580.84.

In fact, the only major indicex that did not set a new record high price was the Dow Jones industrial average. Although it gained 454 points in trading, and is currently fixed at 29,100.50, it still has not reached the record high achieved in February of this year when the Dow traded to 29,449.

U.S. equity strength occurred concurrently today with dollar strength. The U.S. dollar index gained .35% and is currently fixed at 92.66. However, dollar strength only contributed a small component of today’s decline in both gold and silver pricing. The majority of today’s drawdown can be attributed primarily to market participants bidding gold and silver prices lower.

As of 5 PM EDT spot gold is currently fixed at $1,943.10. According to the KGX (Kitco Gold Index) gold lost $7.70 because of dollar strength. However, selling pressure resulted in an additional drawdown of $19, which when combined with dollar strength resulted in today’s $26.70 decline. Spot silver is currently fixed at $27.43, which is a decline of $0.64 on the day. Selling pressure resulted in a decline of $0.53 today, with the remaining decline of $0.11 directly attributable to the U.S. dollar.

Many technical traders watched as gold moved back above $2,000 per ounce on August 8, and opened above $2,000 on August 9, but could not sustain that price point and in fact closed at $1,970 that day. This was truly an indication that $2,000 per ounce was a major resistance level that gold has been unable to effectively hold above.

Gold futures basis the most active December 2020 contract lost $29.90 (-1.51%) today, and is currently fixed at $1,949. Silver which had been outperforming gold in terms of percentage gains during rallies lost 3.6% today taking silver futures to $27.615, after factoring in today’s decline of $1.03.

Our technical studies indicate that the first level of minor support in gold futures occurs at $1,941.40. This is the 23% Fibonacci retracement from a data set that begins in March when gold was trading at $1,449 up to its record high at $2,088. The next level of support in gold can be seen at $1,900 per ounce, with major support at the 38% Fibonacci retracement level which comes in at $1,845. These studies also indicate that there is substantial resistance at $2,000 per ounce.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer