Gold Succumbs to Selling Pressure After Failing to Trade Above $1300

Gold had been trading dramatically higher from the recent low of $1215 achieved on May 9^th. Over the last month, gold pricing had gained roughly $84, trading at a new yearly high on Tuesday of this week, when prices reached $1298 per ounce. This price point was a little more than a dollar above the former yearly high achieved during the week of April 17^th.

However, Wednesday prices failed to breach $1300 as sellers entered the market, and from that point forward, market participants witnessed as gold prices declined dramatically. As of 4 o’clock Eastern Standard Time, August gold GCQ7, -0.78% lost $10.00, or 0.8%, to settle at $1,269.40 an ounce.  This downward pressure has created a double top at $1300, which reconfirms current resistance at that price point.

That is unless you have been buying gold with British pounds. The recent election in the United Kingdom put dynamic pressure on that country’s currency. In fact, gold price in sterling closed at a seven-week high.

As reported by Bloomberg News, “Bullion priced in sterling rose as much as 2.2 percent to 1,007.52 pounds an ounce, a seven-week high, after Prime Minister Theresa May failed to win an overall majority.  In dollar terms, gold futures fell, posting its first weekly loss in more than a month, as market attention for the rest of the world refocuses on the prospect of U.S. interest rates rising next week.”

For the remainder of the world, yesterday’s testimony by the former director of the FBI, James Comey, did not elicit a flight to safe haven assets as many predicted it might. Traders and investors, it seems, have moved past this week’s political turmoil and are now focusing on the next FOMC meeting, which is scheduled to begin next week.

Based on the CME’s FedWatch tool, there is a 99.6% probability that an interest rate hike is still in play this month. Although it is widely believed that a June rate hike by the Federal Reserve has been factored into current pricing, a rate hike would be supportive of the US dollar and continue to place downside pressure in gold.

Wishing you as always, good trading,