Gold Unable to Hold onto Yesterday’s Price Gains

Any hope for potential support and subsequent reversal in gold was short-lived as a strengthening U.S. dollar and a predominantly bearish sentiment took prices lower today. Gold futures are currently trading off by nine dollars to be fixed at $1,324 per ounce, a net decline of -0.67%.

Except for palladium, precious metals are trading lower today across the board. Physical palladium is trading unchanged on the day. A decline of $4.30 due to a strengthening U.S. dollar was compensated entirely by buyers bidding up palladium by that exact amount.

Gold, silver, and platinum were lower today. Platinum suffered the most significant drawdown to lose $21 of value today, a 2.26% decline. This decline was primarily due to selling pressure, which accounted for $16.90. The remaining $4.10 drop was because of dollar strength.

Selling pressure in both gold and silver only counted for about 20% of today’s decline, with the remaining 80% attributable to dollar strength. Although multiple analysts look at today’s decline as a combination of rising rates and a stronger dollar, it is the rising rates that are the catalyst for dollar strength.

In an interview with MarketWatch, Edward Meir, independent commodity consultant for International FCStone said that he believes gold “will have difficulty withstanding what we see as a rising trend in both the dollar and U.S. Treasury rates and see both pushing higher at least going into Friday’s key Q1 GDP reading.”

Higher interest rates can affect gold prices in both directions. First, as interest rates pick up, higher yields temper the appeal of a nonyielding asset class. At the same time, higher interest rates create greater inflationary pressures which can heighten interest in gold, which traditionally does well during periods of high inflation.

Gold Prices Near First Support Level

Our Fibonacci based technical studies indicate two levels of support for gold. The first level of support (minor) is at $1,318 per ounce. Major support can be found at $1,303 per ounce, which matches the lows traded to on March 1.

Resistance occurs at $1,336 which was the opening price for gold on Monday. Major resistance resides at $1,365, the brass ring in terms of gold pricing that continues to be unbreakable and unsustainable.

Wishing you as always, good trading,