Gold Holds Precariously Just Above $1,200

As of 4:00 PM Eastern standard time, spot gold is trading just above $1,200 at $1,200.09. This occurred after trading to a low today of $1,196.45 before slightly recovering. Although dollar strength can be cited as an underlying force, it is selling pressure that is dominating the markets today. According to the KGX (Kitco Gold Index), today’s decline of $6.10 is composed of mostly selling pressure accounting for $4.50 of today’s lower pricing with the remaining $1.60 attributable directly to dollar strength.

Currently, the dollar is only up by approximately nine points (+0.09%) and fixed at 94.61. Since August 15 of this year, the index has lost over 2% in value as it traded at its high of 96.85, losing value during nine of the last 11 trading sessions. Our technical studies indicate that there is potential for support at 94.00, suggesting that the dollar index could give up another 6/10 of a percent before finding price support.

Yesterday’s U.S. economic data, which revised and updated second-quarter GDP to 4.2%, added to selling pressure in the precious metals markets. A strong and robust U.S. economy would continue to strengthen market sentiment which sees the federal reserve continuing to move towards quantitative normalization by raising interest rates as well as reducing its balance sheet of assets.

Trade Disputes Could Transform into Full-Blown Trade War

With Friday’s deadline for the United States and Canada to come to an agreement on trade quickly approaching, and the real possibility that President Trump will impose tariffs on $200 billion of Chinese imports next week, there is the real possibility that the current trade disputes between the United States and China, and to a lesser extent the United States and Canada, will ratchet up to the next level in which trade disputes become trade wars.

According to Bloomberg News, “President Donald Trump wants to move ahead with a plan to impose tariffs on $200 billion in Chinese imports as soon as a public-comment period concludes next week, according to six people familiar with the matter.”

This would be the “biggest so far and would mark a major escalation in the trade war between the world’s two largest economies. It is likely to further unnerve financial markets that have been concerned about the growing tensions.”

This news has weighed heavily upon the favorable risk-on market sentiment in the United States, resulting in a dramatic decline in equity pricing today, taking the majority of U.S. equity indices lower reflecting the selloff in stocks today.

It seems logical that if geopolitical turmoil in Argentina and Turkey have not had any significant effect on safe-haven assets, if the current trade disputes become full-blown trade wars then we could expect continued downside pressure in both U.S. equities as well as gold pricing.

Wishing you as always, good trading,