Gold Continues to Drift Lower but Maintains Long-Term Gains

Gold continues to trade under pressure, closing lower on the day and lower on the week. Losing roughly $18 on the week, gold futures broke below $1300 per ounce to settle near $1283. This marks the third consecutive week in which gold prices have closed lower. September resulted in a decline of $43 (-3.3 %) as prices slipped from a high of $1326 at the beginning of the month to settle at $1283 today.

September’s price decline in the precious yellow metal runs in tandem with higher pricing in U.S. equities, with the Standard & Poor’s 500 trading to a new all-time high this month.

Recent activity in U.S. equities and gold has resulted in long-term net gains for both asset groups. Most interesting is the fact that both U.S. equities (risk-on), and gold (risk-off) had a respectable 3% gain this quarter.

According to Sarah Benali of Kitco News, “Gold and the S&P 500 are currently in a tight race, The S&P 500 index is trading at all-time highs, up over 3% this quarter and setting itself up for its eighth consecutive quarterly gain.  Gold prices are also up a little over 3% this quarter, despite having cooled off from recent gains.”

This article also cited a report released today by Bloomberg intelligence’s Mike McGlone in which he said, “Since the beginning of the Federal Reserve's tightening cycle in December 2015, spot gold and the S&P 500 Index are up about the same, just above 20%, McGlone noted.”

Even though September resulted in lower pricing for gold and a higher pricing for equities, intelligence’s Mike McGlone believes that “Running neck and neck with the S&P 500 in a tightening cycle should favor gold in most scenarios…With the record-setting stock market barely beating gold, the metal may be worthy of greater attention.”

Looking forward, we can expect to see continued pressure on safe-haven assets, such as gold, if the current more hawkish stance by the Federal Reserve continues and they implement a third interest rate hike this year. Of course, this would be based on solid economic data and the current Trump effect as optimism grows regarding the presidents proposed tax reform.

At the same time, it must be noted that the current crisis over North Korea is likely not over. They continue to move forward with their plan to become a nuclear power. As they get closer to their endgame; the ability to strike at the mainland of the United States with nuclear weapons, it becomes more likely that this crisis will be resolved through military action rather than through diplomatic channels.

Wishing you as always, good trading,