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Gold Prices Retreat as Equities Trade to a New All-Time High

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Today gold traded under moderate pressure, and as of 5:00 Eastern Standard Time, is trading approximately $10 lower (spot gold) at $1231, with April futures trading roughly 6 ½ dollars lower at $1233 per ounce.  This ended the daily advance in gold, which had prices increasing over the last five consecutive days.

There are multiple factors that can be cited for today’s selloff. The first is a tremendous advance in US equities, resulting in new record highs in the Dow Jones Industrial Average, Standard & Poor’s 500, and the NASDAQ Index. This risk-on environment has been partially attributed to statements made by President Donald Trump indicating that details on his tax relief plan are forthcoming.

Today’s lower price is also the result of a strong US Dollar and normal selling. This combination can be seen clearly in the Kitco Gold Index (KGX). The $9.90 decline is a combination of a stronger US Dollar, accounting for $5.10 of the decline, with the remaining $4.80 attributed to normal trading or selling in the market.

Is the Gold Rally Over?

As far as the outlook for gold prices go, the answer must be framed within specific time parameters. We might be looking at a short-term pause, with traders and investors taking profits and awaiting further action of this new administration. However, the long-term prognosis for gold prices is still solidly bullish.

This rally began mid-December of last year when prices reached a low of $1124 per ounce. From mid-December until January 22, gold prices surged approximately $100 in value, trading to $1220. This was followed by a mild correction of roughly 38%, moving gold prices back down to $1180 on January 27. Near the end of January, gold prices began a second leg of this rally moving gold prices roughly $60 higher. This week, gold reached an intra-day high above $1240.

This recent rally in gold has been fueled by the uncertainty factor that is intrinsic to our new administration’s leadership style and tactics. Fueled by 140 charactor soundbites through Twitter, as well as executive orders continuing to divide an already polarized nation, the simple fact is that the tone and timbre of President Trump’s leadership style will probably not change or soften. If that is the case, we have probably not seen the last of increased market volatility or higher gold prices. However, we certainly could be at a point in which gold prices are consolidating and correcting from the recent advances.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer