Gold’s Yearly High, Challenged but Intact

While on the surface it seems that gold prices finished rather flat in trading today. The actual truth is that gold gained moderately as buyers bid the precious yellow metal higher, however extreme dollar strength dwarfed those gains. Spot or physical gold closed today at $1341.10, which is a net decline of $0.80 on the day.

However, on closer inspection we can see that bullish market sentiment resulted in traders bidding gold prices higher by $6.45, with dollar strength contributing a decline of $7.25. This according to the KGX (Kitco gold index).

Gold futures also had a similar scenario play out. The most active August contract is currently fixed at $1345.30 which is a net increase of $1.60 (+0.12%) on the day. The U.S. dollar index gained almost 0.6%. Simple math reveals that gold’s fractionally higher close today occurred after factoring in over half a percent decrease based on an increased value in the U.S. dollar.

The current economic and geopolitical environment which has been a primary catalyst moving gold prices higher still remain firmly intact, and if anything, are becoming more pronounced. The trade war between the United States and China is no closer to resolution as it was a month ago.

Both presidents of China and the United States ready themselves to meet at the G-20 meeting at the end of this month in Osaka Japan. While it is widely accepted that it will not be the leaders who are able to resolve the complex issues in our trade dispute but rather set the tone which will guide the negotiating teams following their meeting. The chasm between the two ideologies continues to widen and key issues continue to be locked in a stalemate.

The recent activity in the Gulf of Oman in which two oil tankers were brutally attacked will certainly add fuel to the fire of geopolitical uncertainty and turmoil. If in fact it was Iran that sanctioned this attack the real question will become whether or not the United States will take military action, and if they do what will be the extent of a measured response.

On a technical basis today’s intraday high is extremely significant and represents a new level of major resistance. The fact that gold prices were able to match the recent yearly high at $1361 is impressive, however the caveat is that once that price point was hit selling pressure entered the market quickly eroding the recent gains and moving prices back to $1345. Which means that the record closing price of this year at $1347 is still intact and unchallenged.

Wishing you as always, good trading,