Gold Prices Firm as U.S Dollar Continues to Climb

The dollar index has been firming ever since it reached a low of 98.75, and recovered closing at 99.10 on Friday, April 1. Over the last two trading days we have seen the U.S. dollar firm. Today the dollar index gained approximately ¼ of a percent and is fixed at 99.825.

At the same time since Friday gold has had three consecutive higher closes, when compared to the opening price of that day. As of 10:30 PM EDT gold futures basis the most active June contract is currently up $2.40 (+0.14%) and is fixed at $1715.60. Spot or physical gold is trading at $1708 which is a net gain of about seven dollars on the day.

Noteworthy is the fact that the spread between physical gold and gold futures has narrowed to approximately seven dollars. This is a far cry from the spread we have seen over the last three weeks resulted in a divergence of $40-$55 between spot and futures pricing.

According to the KGX (Kitco Gold Index) gold gained $6.60 in trading today, and is currently fixed at $1709.10. Today’s net gain was tempered by dollar strength which took away $4.60 of gold’s value per ounce. However, market participants bid the precious yellow metal $11.20 higher resulting in today’s gains of just under seven dollars.

In an article written by MarketWatch hedge fund billionaire Paul Singer, “warned last month that the ultimate path of global stock markets is a drop of at least 50% from February highs.” In a letter to his investors sent in mid-April said that he, “offered a grim outlook for the economy and recommended purchasing gold.” He also said that gold is, “one of the most undervalued” assets available and it’s worth “multiples of its current price” due to the “fanatical debasement of money by all of the world’s central banks.”

This article also said that Andrew Law’s Caxton Associates and Danny Yong’s Dymon, Asia Capital have joined Singer in seeking protection in their gold positions amid further loosening monetary policy. “Gold is a hedge against unfettered fiat currency printing,” according to Danny Yong.

On a technical basis we see minor support for gold at its 21-day moving average, which is currently fixed at $1702. Below that price point is Friday’s low of $1677, with major support at $1657 the 61.8% Fibonacci retracement of the last rally. This leg of the rally began on April 1 when gold was trading at $1458 per ounce, up to this year’s highest value at $1788 which occurred on April 14.

Our studies also indicate the first level of resistance is at $1764, the high achieved on April 23. with major resistance at $1788.

Wishing you as always good trading and good health,