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It’s All About the Dollar

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Gold futures have shown a respectable gain on the day and, as of 4:15 PM Eastern standard time, the most active December Comex contracts are trading up $6.70 and currently fixed at $1,201.30.

Spot gold is currently fixed at $1,193.60, which is a net gain of $3.50 on the day. However, gains realized today are entirely tied to U.S. dollar weakness. In fact, when looking at the KGX (Kitco Gold Index), we can see that dollar weakness provided $6.10 of gains with selling pressure resulting in a decline of $2.60.

Recent dollar weakness can be attributed to criticism from President Trump. This criticism came in an interview with Reuters in which President Trump once again said he is “not thrilled” with Fed chair Jerome Powell in regards to recent rate hikes.

According to Reuters, the president said, “I’m not thrilled with his raising of interest rates, no. I’m not thrilled.” The president went on to say “We’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated.”

The U.S. dollar is currently trading under pressure, trading lower for the fourth consecutive day. Currently, the dollar is fixed at 95.14 and down 64 points (-0.67%).

Recent activity has moved the dollar higher, which traded to a low of 88 in February of this year, up to its highest trading point this year at just shy of 97. This occurred a week ago Wednesday on August 15 when the U.S. dollar traded as high as 96.85. Since that time, the dollar has had a methodical move to lower pricing.

However, our technical studies indicate that the former level of resistance which resides at 95 could, in fact, become an area of support. Traders were able to move the dollar index to 94.96 on an intraday basis today before moving back above 95.

Just as dollar strength has put tremendous pressure on gold prices, taking the precious yellow metal lower for the last couple of months, a reversal in trend would undoubtedly be incredibly supportive of gold pricing.

The real question becomes will the dollar continued to trade under pressure or will it find solid support and inevitably move back to its path of least resistance, which is to move higher?

As far as gold pricing is concerned, a solid close above $1,200 per ounce in gold futures could indicate that pricing has found support and that gold will attempt to form a base in this area before moving higher. That being said there is minor resistance at $1,213 per ounce, with more substantial resistance at $1,220.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer