Gold Closes Higher but Continues to Test the Lows

Gold futures traded marginally higher on the day for the second day in a row. However, in each of the last two trading days market participants have moved pricing dramatically lower intraday. More importantly, the intraday lows of each day were met with a “buy the dip” mentality, taking prices off of the lows, resulting in closing prices near the intraday high.

As of 4 o’clock EDT, gold futures have settled at $1215.70, up $2.50 on the day (+0.21%). It is, however, today’s intraday low that warrants our attention. Even though today’s intraday low was above yesterday’s low, the fact is that sellers were able to take pricing substantially lower on the day, and more importantly buyers were able to bid the market back up to close in positive territory. That to me, on a technical basis, clearly illustrates a potential recovery of this most recent price decline.

Dollar Weakness Provides Tailwinds for Gold Pricing

It must also be noted that recent dollar weakness has contributed profoundly to today’s moderate price increase. Spot gold is currently trading up approximately $1.70 on the day at $1215.80. On closer inspection, it is dollar weakness providing all of today’s net gains. According to the Kitco Gold Index (KGX), dollar weakness is adding $3.90 worth of value, while regular trading has bid gold prices $2.20 lower on the day, with a net result of a $1.70 gain.

Fed Speak

On the immediate financial horizon is the upcoming testimony by Janet Yellen to the Congressional House panel next Wednesday, followed by testimony to the Senate on Thursday.

This is in conjunction with Friday’s release of the Fed’s semiannual monetary policy report. The report highlighted the Federal Reserve’s intention to continue its current policies, which are looking to implement gradual interest rate hikes along with normalizing its balance sheet through the liquidation of assets. Statements made in the semiannual report are in line with minutes released from the June FOMC meeting.

There is still inherent uncertainty as to the net effect of the Fed’s balance sheet liquidation. However, what is clear is the Federal Reserve’s intention to begin this liquidation in September of this year.

Wishing you as always, good trading,