Gold Closes Lower for the Fourth Consecutive Week

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Although gold futures finished fractionally higher on the day, it has closed lower on the week. This now marks the fourth consecutive week in which gold futures have closed lower and below the open on Monday. When we look at a weekly candlestick chart, we can see that even though gold closed, in essence, unchanged, it is a red colored candle indicating the close is below the open for the week.

Over the last eight weeks, gold has only closed higher on only one occasion. More significant is the fact that over the previous two months gold has lost almost $100 in value.

The last two months we have seen the U.S. dollar remain strong, and the U.S. equities markets continuing to hold firm and recover from the three-week selloff which began during the week of June 11. U.S. equities have gained value for the last five consecutive weeks when viewed through the Dow Jones Industrial Average.

This strong risk-on environment created from rising equities prices coupled with dollar strength and rising interest rates have made safe-haven assets maintain a defensive posture.

Dollar Index Closes Above 95

Although the dollar gained only fractionally today, on a weekly basis the index closed above 95 for the first time since July 2017 (on a daily chart the dollar closed at 95.11 on June 28).  As of 4:30 PM Eastern standard time, the dollar index is up 0.05% and trading at 95.04.

The only event holding the dollar back this week was today’s jobs report which showed that in July the U.S. gained 157,000 jobs. This was below the analyst's estimates (MarketWatch forecast) which predicted that 195,000 jobs would be added in July.

The steady and growing U.S. economy continues to weigh on gold prices. As long as economic forecasts continue to reveal stability and growth, the U.S. dollar should remain firm and precious metals pricing will continue to trade under pressure.

Spot gold fared much better than gold futures today resulting in a gain of $5.90. Currently, spot gold is fixed at $1,213.10. On closer inspection, today’s gains were the direct result of traders bidding up the precious yellow metal accounting for a gain of $6.50, but fractional gains in the dollar index took away $0.60 of value.

On a technical basis, gold futures were able to hold above a critical support level which resides at $1,218. This level is a 0.618% retracement created from the lows ($1,124) gold traded to at the end of 2016 to the highs achieved at $1,369 this year. Below this level is a psychological support level of $1,200 per ounce, followed by a support level at $1,178 which is the 0.78% retracement level. Currently, we have major resistance at $1,240 per ounce.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer