Gold Rides Higher On Weaker Dollar

No thanks to regular trading, gold took back some of its recent losses today, rising about 0.37%. It was all done on the back of a softer U.S. dollar. Silver did far better, rising on regular trading as well as the weakness in the greenback.

West Texas Intermediate closed down another 3.45% on the day while Brent was off about 3.00%. (Both are off their lows in continuing afternoon action.) The fall in prices was primarily based on yesterday’s news that stockpiles were up and efforts at coordinating production freezes are evidently on hold once again.

OPEC countries and other petrol-states simply can’t afford to stop pumping if everyone doesn’t come on board with the production freeze. Aside from individual needs of OPEC countries, you have economic exigencies for countries as diverse as Russia and Venezuela. Russia may not be in its salad days but Venezuela is a complete shambles and is verging on “failed-state” status.

WTI is aiming at the $43 per barrel level at the moment. Oil has spent most of the last twelve months rambling around the $40 to $50 range and little in the way of fundamentals appears to be about to jolt it from that constriction.

Energy is holding equities back, especially in the Dow Jones Industrial Average. Overall, materials are still weak and the negative ADP employment survey view of manufacturing jobs (cited here yesterday) is weighing on the Dow and the S&P 500.

The NASADQ is up, but that too is sluggish.

Most investors are waiting for tomorrow’s Department of Labor figures, which should –with a few adjustments – track close to ADP’s private assessment.

There is also some sidelining in the dollar trade, regardless of which major pairing you look at. The broader currency basket was up against the buck by about 0.40%. It should be noted, though, that the British pound is contributing quite a bit to the dollar softness.

The pound’s strength comes from a ridiculously strong UK Purchasing Managers Index reading for August. The Brit PMI hit a 10-month high.

Perhaps today is a good day to take a breather. There is not only the mystery of tomorrow’s jobs report but the long holiday weekend in the U.S. and Canada. We will see the true end of summer in New York as the vacation trippers of Wall Street finally close up shop in the Hamptons, Berkshires and upstate New York.

The CME FedWatch probability index, which measures the likelihood of Federal Reserve interest rate hikes flipped from 27% to 24% then back again. The two numbers have been flashing alternately recently.

Quietly, the VIX volatility index is creeping back up toward a reading of 14.00, not exactly hot, but perhaps indicative of a set of conditions coming soon to a theater near you. A rise in interest rates, in and of itself, would not force the VIX super high, but the perception that higher rates would significantly slow down the U.S, European, Japanese and Chinese economies could be that event.

Wishing you as always, good trading,