It is a One, Two Punch for Gold
Gold futures continues to trade under pressure, and as of 3:15 PM Eastern standard time is currently trading down $8.50 at $1,260.40. Today’s lower pricing is a combination, a one-two punch, of sellers and strong U.S. dollar.
The dollar is currently up 43 points (+0.47%) at 94.385. After testing and unsuccessfully trading above the current resistance at 95, the dollar traded under pressure for the last four trading days. After reaching a low of 93.80 yesterday, and opening at that price point, the dollar index has gained almost a half a percent in trading today.
Physical gold is trading $7.00 lower on the day and currently fixed at $1,258.10. According to the Kitco Gold index (KGX), today’s price decline can be divided with $4.90 of the decrease attributable to dollar strength, and the remaining $2.10 drop as a direct result of sellers bidding gold prices lower.
Of the precious metals complex, gold is the only metal in which selling pressure is a component of lower pricing. Silver is trading six cents lower on the day, but that is 100% a net result of dollar strength. Platinum is unchanged as a result of equal dollar strength pressure and buying. Palladium prices are surging currently and up $17.00, a combination of dollar strength and buyers bidding up the metal by $20.65.
Technical Indicators Suggest Continued Selling Pressure for Gold
Gold prices broke below a critical support level at $1,267. This support level is the 78% retracement of the only major rally this year in gold, which began in December of last year and concluded at the end of January. At the same time market technicians witnessed the completion of a “death cross” when the shorter-term 50-day moving average crossed below the 200-day moving average yesterday. These technical studies are clearly indicating the potential for further selling pressure.
The fundamentals which have pressured gold prices lower remain and continue to weigh heavily limiting any gains. U.S. equities once again have magnified risk on market sentiment as they trade higher on the day. This coupled with dollar strength have pressured gold resulting in today’s lower pricing.
At the same time, the safe-haven aspect of gold has been largely ignored as the United States and China move closer and closer to an all-out trade war. The current trade dispute and the proposed implementation of tariffs on both sides indicate that trade policies between both countries probably contain more friction before these two superpowers resolve their issues.
As long as the dollar gains strength, gold prices will face an uphill battle just to stay even. The fact that the precious yellow metal is not acting as a traditional safe-haven asset is another factor limiting any upside move in gold prices. All of these factors continue to shape gold, taking prices lower.
Wishing you as always, good trading,
Gary S. Wagner - Executive Producer