Gold Continues to Trade Under Pressure

Gold continues to trade lower, effectively trading and closing at the lowest price point this year. In trading overseas, last night gold futures hit a low of $1,167.10 before recovering. As of 3:30 PM Eastern standard time, December Comex futures are currently trading off by $4.20 and fixed at $1,180.80.

Although the dollar index is trading slightly lower on the day, there is an undeniable pressure created today from incredibly strong U.S. equities market. With about half an hour left in trading today, the Dow Jones Industrial Average has scored gains of approximately 427 points and is currently fixed at 25,590. This is a net gain today of 1.7%. Even though the Dow is still one thousand points from its all-time record high, gains today are substantial and extremely respectable.

Recently gold pricing has been primarily affected by dollar strength and a strong risk-on sentiment from U.S. equities. Largely unforeseen was the fact that recent geopolitical concerns, such as the trade disputes between the United States and other countries (specifically China) as well as the recent economic turmoil in Turkey, have resulted in a safe-haven play through the U.S. dollar rather than gold.

Recently we have revised our target from $1,200 per ounce to $1,178. This occurred on Monday when gold futures effectively hit that price point, and spot gold drifted to $1,190 per ounce. $1,178 is a 0.78% Fibonacci retracement and also matches lows found in January 2017, which is the last time gold prices traded that low.

A break below that price point would put our next downside target in play, which is $1,124 per ounce. This price matches the lows achieved in December 2016, which occurred months after the presidential election. The presidential election caused gold pricing to gyrate wildly, trading as high as $1,338 on the night of the election and closing at $1,272 the following day. From November through the end of the year we had gold prices drop until they hit the lows at $1,124 on December 15, 2016.

As we have spoken about on many occasions, the future direction of gold pricing is intrinsically tied to dollar strength or dollar weakness. Over the last few months, it has been dollar strength that has been prevalent and a major factor in the underlying cause of lower prices in gold. We continue to believe that dollar strength will result in sideways or lower pricing in gold.

Wishing you as always, good trading,