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Headline’s get ahead of themselves

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In this headline driven market, sentiment can easily overreact to any news story that talks about perceived optimism, or pessimism. In regards to whether or not the United States government will be able to pass fiscal stimulus legislation prior to the presidential election on November 3rd, and traders are hanging on each and every changing headline. Today market participants witnessed choppy trading in U.S. equities resulting in gains of just over ½ a percent in both the Dow Jones industrial average and S&P 500. While the NASDAQ composite scored gains today of just under 2/10 of a percent.

Many precious metals analysts have cited today’s sharp selloff in the both gold and silver as a result of U.S. dollar strength. However, it was selling pressure that had a cascading effect which began as markets opened up for trading in Australia last night. Within the first few hours of trading overseas gold prices already had begun to decline. It began with a modest sell off in Australia, which accelerated into Hong Kong. However even though gold prices were on the way down in Asian markets they were able to hold above the key psychological level of $1900 per ounce. Selling pressure magnified as it entered London, leading to a break below $1900.

Gold futures basis the most active December Comex (Globex) contract traded to an intraday low of $1894.20 by the close of trading in London. From there pricing began to slowly recover as New York markets opened and market sentiment shifted slightly from bearish to a more bullish demeanor. This on optimism from statements made by the speaker of the House Nancy Pelosi where she acknowledged that a fiscal stimulus deal was still possible before the presidential election. That headline helped move back above $1900 per ounce.

That being said gold did close with strong losses today. As of 4:25 PM EST gold futures are currently fixed at $1906.50, which reflects today’s decline of $23.00 (-1.19%). The decline in silver was steeper as the most active December 2020 contract gave up 1.65% (-0.416).

While dollar strength did contribute to deteriorating gold and silver prices, the vast majority of today’s declines were the direct result of selling pressure. This can clearly be seen when viewing the KGX (Kitco Gold Index). On close inspection of the KGX dollar strength only accounted for $6.55 of spot gold’s losses, with the remaining decline of $12.65 directly attributable to selling pressure. The sum of these factors led to the $19.20 fall in spot gold which is currently fixed at $1905.10.

Wishing you as always, good trading and good health,

Gary S. Wagner - Executive Producer