Gold Tries to Escape Tug of Stronger Dollar and Equities

For most of the day, seeking firmer fundamental trading direction and finding little to none, gold found itself at the mercy of a slightly more robust U.S. dollar. As we reached the end of the trading day, though, gold succumbed to regular trading declines brought on by optimism in the stock markets.

At 4 PM in New York, the dollar is up about 0.30% against the euro, the two currencies that generally rock the cradle of precious metals. The greenback jumped around 0.60% against the yen.

The strength of the dollar is causing some upward pressure on U.S. government paper auctions, but we will not see anything of any note until we get closer to the next FOMC meeting in September, which could foretell higher interest rates. It is doubtful a rate hike will occur then, but opinions will abound in anticipation of rates’ doing so by end of year.

Crude oil settled up 4.25% although has since fallen back under a 4.00% rise. The stronger dollar did not get in the way of that spike. The higher prices were due to more chatter from Saudi Arabia, chatter that we are skeptical of as packing any long-term punch.

We are looking with a dubious eye on the outcome of the next OPEC meeting in late September in Algeria. It is shaping up to be a repeat of the Doha meeting this past April when broader production control talks fell through when Saudi Arabia ditched the cartel’s goals, citing Iran's refusal to join in a so-called production freeze. The Saudis and Russia have since been pumping record amounts of crude.

The rise in energy prices boosted the Dow and the S&P 500 to fresh record highs.

Aside from energy, though, 3M saw another nice pop from earnings. It is a stock that has risen 40 points since January of 2016, up about 22%. The price of the American traded issue of China’s online retail giant Alibaba rose 6%. Robust purchasing is giving encouragement to those who watch China’s man and woman in the street’s consumer trends.

The tech sector as measured through NASDAQ listed stocks also had a good day with consumer electronics and bio-tech leading the way.

The waves on the ocean of trading are still very calm as we trudge deeper into August and the last hurrah of vacation time.

Sooner than we wish, Labor Day will roar past us, kids will go back to school, and we will be on tenterhooks waiting for the outcome of the Federal Reserve meeting on September 20-21.

Meanwhile, volatility, as measured by the VIX index on the CBOE is bobbing around at a low, low 11.75.

Hot, hazy, very slight chance of storms, we are waiting for the seasons to change.

Wishing you as always, good trading,