Gold Prices Plunge to Lows of January 2017

Gold prices declined dramatically today with December futures trading to a low of $1,180. As of 4:30 PM Eastern standard time, gold futures have come off of the lows and are trading at $1,182.30, which is a net decline of $18.40.

The selling began with dollar strength moving the precious yellow metal lower. At its high, the dollar index traded to 96.87. However, as the dollar moved off of its highs and traded unchanged, gold remained under pressure and ultimately lost more ground. Currently, the dollar index is trading at 96.54.

It seems that the current economic crisis in Turkey has affected markets globally. The Turkish lira, which had been dropping profusely, rebounded by 6% against the U.S. dollar today. This reversal occurred after Turkey responded to U.S. tariffs by doubling tariffs on U.S. imports of tobacco, cars, and alcohol. However, the 6% rise in the Turkish lira is still muted against the 40% fall this year when paired against U.S. dollars.

Spot gold is currently fixed at $1,175.30, which is a net decline of $18.40 on the day. According to the Kitco Gold Index (KGX), only $0.10 of today’s decline is attributed to dollar strength, with the remaining $18.30 as a direct result of traders bidding the precious yellow metal lower.

Today’s lower pricing occurred in conjunction with a U.S. equities market under pressure. The Dow Jones Industrial Average traded to 24,965 before recovering slightly and closing down by 137 points at 25,162.

Today’s decline in U.S. equities occurred in conjunction with global equities trading dramatically lower. According to Reuters, “Equities around the world took a dive on Wednesday, with emerging market stocks set to confirm a bear market and the dollar hitting a 13-month high, while weakness in China’s yuan rattled investors’ nerves. The stronger dollar also put commodities under pressure across the board, with copper hitting a 12-month low and gold at an 18-month low. Oil futures also lost ground. While fears of a crisis in Turkey still loomed, China was in sharp focus as the yuan sagged nearly 0.8 percent to 6.9467 per dollar, hitting its weakest level since January 2017 following disappointing economic data earlier this week.”

Our technical studies indicate that there is potential (minor) support for gold pricing at $1,178 per ounce. This is based on the 0.78% Fibonacci retracement, which is created from the lows in December 2016 at $1,124 to the highs this year at $1,369. If gold pricing breaks below that level, the next level of major support would be at $1,124. Currently, resistance can be found at $1,200 per ounce, the former psychological support level.

Wishing you as always, good trading,