Gold Closes Strongly Higher on Safe Haven Demand and Weak U.S. Dollar

As market participants react to continued geopolitical concerns in both the Middle East and northern Asia, safe haven demand continues to bid up gold pricing. Trading to highs not seen since November of last year, gold futures are currently up approximately $10 on the day and are trading to an intraday high of 1285.

As reported by Myra P. Saefong and Mark DeCambre of MarketWatch, “Ongoing geopolitical tensions across the globe and heightened political risk in Europe have limited appetite for riskier assets this week, with global stocks now on the back foot,” said Lukman Otunuga, research analyst at FXTM, in a Wednesday research note.

A spate of geopolitical worries from tensions in Syria, after a U.S. airstrike in retaliation for an apparent chemical attack last week that strained relations with Russia, to mounting fears over North Korea, are unnerving investors, fueling demand for haven assets.”

U.S. Dollar Weakness Accounts for the Majority of Today’s Higher Gold Prices

As of 4 o’clock Eastern Standard Time, spot gold is currently trading up approximately $8.30 at $1282.30. The U.S. dollar is currently trading down roughly .44% at 100.18. Per the Kitco Gold Index (KGX), about $6.90 (.54%) of today’s dramatic rise in gold is directly attributable to U.S. Dollar weakness, with only $1.40 (.17%) of today’s growth due to market participants buying and trading gold.

Dollar weakness might be directly attributable to statements made by President Donald Trump in an interview with the Wall Street Journal.

According to Reuters, “President Donald Trump said on Wednesday that the dollar was "getting too strong" and would eventually hurt the U.S. economy, even as he said he would like to see interest rates stay low, the Wall Street Journal reported.

In an interview, Trump also said he would not label China a currency manipulator in a U.S. Treasury report due later this week, the Journal said. He also said he respected Federal Reserve Chair Janet Yellen, saying she was "not toast" when her current term ends in 2018.”

A Case for the Technical Indicators

On a technical basis, it is significant that yesterday’s gold prices moved above the 200-day moving average. Today we have certainly seen extreme follow-through. Our technical studies indicate the current level of support in gold rests roughly at 1262, and the first level of resistance, at 1300, is less than $20 above current pricing. As we spoke about yesterday, our upside target remains at 1327.

Wishing you as always, good trading,