Gold Is Serving At The Leisure Of The Dollar – Finds Some Upward Momentum Today

With the U.S. dollar struggling today, seeking its own direction after a downward revision of GDP for the first quarter, gold has taken advantage and moved up in afternoon trading. For much of the day, the precious yellow metal was trading at just over even as the dollar slipped in the late morning.

Gold was also helped by an outside market today – namely crude oil.

West Texas Intermediate is up at 4PM in New York by around 4.5% on the day. While gold and oil have recently not been trading in tandem, a new convergence seems to be emerging that we will have to keep our eyes on. But, as we know, what goes up also goes down. Brent North Sea is also up on the day right around 4.5%.

It is our opinion, though, that the dollar will not stay soft for very long, nor will oil stay very high before a new development – like Iraq pumping more crude – knocks it down.

As we are seeing, no one market has a clearly defined trajectory. In equities, it seemed for a while that the Shanghai index was unstoppable. However, it has tumbled in the last two days, although bargain hunters will probably step in as soon as Monday. All of Europe was also down as were the three indices in New York.

The fact is that the world economy has a low-grade infection it can’t seem to shake. So, when some relatively innocuous piece of bad news pops onto the Internet, TV or their trading screens, analysts and investors are quick to react.

Primarily, they want to make some money on range trades but they often enough are truly worried.

You would think that gold would be the beneficiary of such uncertainty. Unfortunately for gold bulls, that isn’t the case. You may choose a variety of reasons as to why gold is stuck. Physical demand is low. Bond yields are stronger. Despite the ups and downs, equities are a good bet. But…

The pervasive uncertainty has turned trading into 1) a range game or, 2) a go-slow-and-wait game.

Monday we are going to focus again on interest rates, not just the Fed situation, but also where bond yields are going and what that means to the larger economic picture in the U.S. and the world.

Wishing you as always, good trading,