Gold Is Pummeled by Dollar, Continues Free Fall

With the U.S. dollar rising, it seems, by the hour, gold and silver have nowhere to go except down. Today the U.S. super currency was up 0.35% against the euro, gained almost twice as much on safe haven yen and banged out a 0.30% rise against the Swiss franc.

The dollar is in swagger mode and gold is in full retreat. The yellow precious metal is off $7.80 today and well more than half of that is dollar strength. Regular trading is piling on the losses, responding via program-trading each time the dollar hammers gold, selling off when new dips occur. Interestingly, silver only saw selling due to the dollar situation. Regular trading was neutral.

U.S. equities took a bona fide breather today, all three major indexes trading off about 0.20 to 0.25%. The NASDQ was off but only after hitting an eleven-month high. European stocks were also off modestly although the French CAC did fall 0.50%. Asia was mixed with Shanghai down about half a percent.

Crude oil settled up about 0.55%, which gave it its first weekly gain in four weeks. A few counter currents pushed and pulled oil prices.

The strong dollar was important on the pressure side as was a report on new rigs. Baker Hughes, the oilfield services firm, reported the largest weekly rise in its count of oil rigs operating in U.S. fields since the recovery began at the end of June. The count rose by 19 rigs to 471 during the last week.

The counter influence on oil prices came from hopes that OPEC would reach an agreement to limit production. It seems that Iran has been offered a few deal sweeteners to bring it on board, meaning Iran will be allowed to recover its production levels, which sank while sanctions were imposed by international bodies. The sanctions have been lifted for some time.

The U.S. 10-year bond yield broke energetically over the 2.30% mark, closing at 2.339%. As we said yesterday, this is important because real-life interest rates track the 10-year yield. Mortgage rates add anywhere from 1.25% to 1.75% to that benchmark yield level.

As we approach the holiday season again, it’s best to remember that there are dead spots in trading activities in the United States. Next week that may very well encompass Wednesday and Friday. It will surely include Thursday, which is Thanksgiving Day, a national holiday.

And, as end of year approaches, we tend to think expansively and historically. Come January 20, 2017, Republicans will hold the presidency and the full Congress for the third time in the last hundred years. The last time was 2005 to 2007, and previous to that it was from 1929 to 1931.

We wish no one ill and hope for the best, but history tells us that 2007 and 1929 were momentously bad years for the U.S. economy.

Wishing you as always, good trading,