Gold gives up earlier gains due to U.S. dollar strength

In trading overseas gold prices managed to reap moderate gains as dollar weakness and interest by market participants in the safe-haven asset moved the precious yellow metal higher. In fact, gold futures basis the most active December 2020 Comex contract traded to an intraday high of $1975.20 before retreating. If gold had held on to earlier gains it would have marked the third consecutive day in which gold prices moved higher.

As of 4:45 PM EST, the U.S. dollar index is up approximately 13 points (+0.14%) and fixed at 93.39. This reversal from weakness to strength in the U.S. dollar eroded much of the gains witnessed earlier in gold pricing. Currently, gold futures are trading at $1954.60 which is a net decline of $0.30 on the day.

Statements made by Christine Lagarde; the ECB’s president had the net effect of taking the U.S. dollar from negative territory to positive gains on the day. The ECB President said, “there is no need to overreact to euro gains”.

The ECB’s Governing Council meeting held on Thursday reiterated that it will maintain its currently scheduled €1.35 trillion plan of quantitative easing to support the contracting economy directly related to the pandemic.

According to Ambrose Evans-Pritchard, a reporter for The Telegraph, “The ECB has other problems. It suddenly faces a systemic policy broadside from the US Federal Reserve, which has shaken up the world of central banking with a new regime of flexible inflation targeting - academic jargon for looser money and a greater willingness to ‘run the economy hot’ in order to boost jobs.”

According to Yahoo finance, “The European Central Bank has dashed hopes of fresh stimulus to buttress the faltering recovery and to restrain the surging euro, sending the single currency rocketing higher against sterling, the dollar, and the yuan.”

According to Reuters recent data suggests that there is still a large number of Americans who lost gainful employment during the pandemic and continue to require unemployment insurance. For the week ending on September 5 claims for state unemployment benefits remained at a seasonally adjusted 884,000, this according to the United States Labor Department. This number reflects an additional 93,000 individuals receiving benefits.

“All told, some 29.6 million Americans were relying on some form of unemployment insurance as of Aug. 22. That figure equates to a little under a fifth of the total number of jobs supported by the U.S. economy in February, before the current economic crisis hit.”

While it is clear that there has been a gradual recovery for the U.S. economy, it is also apparent that the recovery has been much slower than many had hoped for.

Wishing you as always, good trading and good health,