Gold gives up recent gains as the Nasdaq and S&P 500 trade to new record highs

Gold prices fell sharply today after yesterday’s attempt to trade and close above both the long-term 200-day and interim term 100-day moving averages. This might have prompted short-term traders to pull profits after Monday’s price surge, which took gold prices back above $1800 per ounce.

 On Monday, gold opened just above $1780 and closed at $1806 in brisk trading. This was followed by Tuesday’s price action, which included a higher high and a higher low than Monday. However, on Tuesday, gold futures were unable to close above the 100-day moving average (currently fixed at $1809.50) which on a technical basis has served as the first level of resistance, followed by major resistance, which occurs at the 200-day moving average, which is currently fixed at $1812.50.

This would have prompted short-term futures traders to pull any profits they obtained if they entered the market on Friday of last week or this Monday. This is being cited as one of the primary forces which took gold lower today. It is also important to note that market sentiment continues to favor the risk-on asset class as U.S. equities continued to rally into Wednesday’s trading session.

New record highs were achieved in the NASDAQ composite today, which gained 22 points (+0.15%), closing at 15,041.8585. The NASDAQ’s new record high occurred in conjunction with a new all-time high in the S&P 500 which gained 9.96 points (+0.22%) and is currently fixed at 4496.19. Although the Dow Jones industrial average gained roughly 1/10 of a percent in trading today it is still trading below the record high that was achieved on Monday, August 16.

As reported by CNBC, Bart Melek, head of commodity strategies at TD Securities said, “There has been a boost in risk appetite and the dollar has also climbed up resulting in some consolidation in the metal.” He also said that some investors were taking profits on positions in gold.

The U.S. dollar traded to a high of 93.14 before closing down by almost 1/10 of a percent and is currently fixed at 92.82.

A CNBC analysis wrote that “Investors remain divided over whether they will get a roadmap on when the U.S. central bank may start trimming its bond-buying program and if Powell would tone down the Fed’s hawkish tone, in turn helping gold.” The article also quoted Michael Matousek, head trader at U.S. Global Investors , “The longer-term (gold) holders are on the sidelines right now, until they get a little clarity out of the Jackson Hole (Symposium).”

While we acknowledge the division amongst investors regarding what Chairman Powell will say during his speech on Friday, if the Federal Reserve’s action continues to be based on the most recent data it would be hard to conceive that they would ignore the data involving the recent surge of the Delta variant as it spreads unevenly throughout the United States. The recent surge in new infections undoubtedly will have economic repercussions which should temper the more hawkish tone acknowledged in the minutes of the last FOMC meeting released last week.

As of 5:32 PM EST gold futures basis, the most active December 2021 Comex contract is down $15.60 and fixed at $1792.70, approximately $1.00 below gold’s 50-day moving average.

Wishing you, as always, good trading and good health,