Gold trades higher for the third consecutive day

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Ever since Thursday of last week, when gold closed over $30 higher prices have advanced. Although Friday’s gains were fractional, follow-through buying today took gold to its highest closing price since Wednesday, September 22. On that day gold closed at approximately $1778, thus completing three days of moderate to strong gains which began on Monday, September 20.

As of 5:04 PM EDT gold futures basis, the most active December 2021 contract is up $12, or 0.68%, and fixed at $1770.40. Recent gains can be attributed to a combination of market participants bidding the precious yellow metal higher, lower U.S. equity prices, and dollar weakness.

All three major indexes closed lower today with the NASDAQ composite sustaining the largest percentage decline yielding a loss of 2.14%. After giving up 311 points the NASDAQ composite closed at 14,255.4848 today. The S&P 500 lost 1.3% and is currently fixed at 4300.46. Lastly, the Dow Jones Industrial Average sustained a loss of 0.94%. After factoring in today’s decline of just over 323 points is currently fixed at $34,002.92.

There are certainly crosscurrents with some outside markets having a bearish influence on gold such as the recent rise in yields of U.S. Treasury bonds and 10-year notes. Also providing some bearish influence is the announcement by the Federal Reserve last month that they intend to begin the process of tapering their monthly asset purchases as early as November of this year. They also penciled in an interest rate hike for 2022. This would be the first interest rate hike signaling lift off since the Federal Reserve dropped their Fed funds rate in early 2020 to temper the recession which followed the global pandemic.

Recent dollar weakness coupled with anxieties regarding recent action by China towards Taiwan is also highly supportive of gold prices. Multiple news sources reported that increased tensions between China and Taiwan have resulted in increased activity by the Chinese military. China’s military sent 52 military aircraft into Taiwan airspace on Monday which is the largest military response to date.

According to The Hill, “Taiwan is preparing for a potential war with China following a series of increasingly aggressive military activity from Beijing, with Taipei’s foreign minister warning that should the nation attack, it would “suffer tremendously.”

ABC News also reported that Taiwan warned that its country is preparing for war with China. “Taiwan’s Foreign Minister warns his nation is preparing for war with China and urges Australia to increase intelligence sharing and security cooperation as Beijing intensifies a campaign of military intimidation.”

Taiwan’s Foreign Minister spoke with ABC’s China tonight saying that if China were to launch an actual strike its democratic state would be ready to repel it. “The defense of Taiwan is in our own hands, and we are absolutely committed to that,” Mr. Wu told ABC’s Stan Grant in an interview to be broadcasted on Monday evening.

Unquestionably the current issues which are affecting the financial markets including gold are an ongoing fluid scenario. On a technical basis, we could see price resistance in gold just above today’s recent close at $1770.40. The 50-day moving average occurs at $1770.40 and could be the first level of resistance curtailing further upward moves in gold.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer