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Gold futures close at new all-time record high, even with dollar strength

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It’s about the Benjamin’s, at least for today. It was dollar strength that curtailed more upside gains in gold. Even with moderately higher dollar, once again gold futures closed at a new all-time record high. The most active December 2020 Comex contract traded to an intraday high $2009.50, and as of 4:14 PM EDT is currently fixed at $1991.00, gaining $5.10 (+0.26%) in trading today.

Gold futures opened higher at $1997 when it began to trade Monday morning in Australia. Shortly after gold prices surged above $2000 and traded to the daily high. Gold prices quickly retraced once the U.S. Dollar index opened for trading, breaking back below that elusive and key psychological price point. Early gains in the dollar index prompted light selling, which quickly diminished as the trading day progressed.

Currently the U.S. Dollar index is fixed at 93.495, after factoring in today’s advance of 0.174 points (+0.19%). The dollar traded to an intraday high of 93.98, before settling 2/10 % above Friday’s close, settling slightly above the intraday low of 93.295.

Our technical studies indicate that we could see more downside pressure for the dollar in the weeks and months to come. Over the last six consecutive weeks traders have witnessed the dollar in a technical freefall. More importantly last week the dollar opened above the key Fibonacci retracement level of 38.2 % on Monday which is currently fixed at 94.23 and closed at 93.32 on Friday. The next major level of technical support occurs at the 61.8% Fibonacci retracement level which is fixed at 88.369.

At the end of 2017 the index was trading just above the 38.2% retracement level, and by the first quarter of 2018 had traded to lows below 88.36 before finding support at 89. After trading in a relatively narrow price range between 94 and 97 the dollar index surged at the beginning of March 2020, trading above to 103. During the week beginning on March 16 traders witnessed one of the largest single-week drops in the dollar, moving the index from just above 103 to 98.54, a decline of approximately 5%. Considering that the dollar has lost approximately 10% in the last 4 ½ months.

Unquestionably recent gains in gold since the middle of March can be attributed to a renewed interest in the safe haven asset, as investors and market participants seek alternative asset classes which could whether the economic contraction created by the global pandemic. However, it has been dollar weakness that has aided the speed at which we have seen gold move to all-time record highs on multiple occasions over the last few weeks.

Wishing you as always good trading and good health,

Gary S. Wagner - Executive Producer