It’s All About Dollar Weakness

Gold futures are trading fractionally higher today, with the most active June 2018 Comex contract currently fixed at $1,348.60, a net gain of $0.70 on the day. Spot gold is currently trading up $0.20 on the day and fixed at $1345.60.

According to the KGX (Kitco Gold Index), it is dollar weakness that is 100% accountable for today’s fractional price increase. Gold has gained five dollars in value based upon a weakening US dollar, with a net decline of $4.80 as a direct result of sellers bidding gold pricing lower.

On Friday after the U.S. markets had closed for the day, a U.S.-led missile strike directed at Syrian chemical weapons installations commenced.

As reported by the New York Times, “The United States and European allies launched airstrikes on Friday night against Syrian research, storage, and military targets as President Trump sought to punish President Bashar al-Assad for a suspected chemical attack near Damascus last weekend that killed more than 40 people.”

This proportional strike hit three of President Assad’s chemical weapons facilities, which included a scientific production research center in Damascus along with two chemical weapons facilities west of Homs.

Although Trump said, “We are prepared to sustain this response until the Syrian regime stops its use of prohibited chemical agents.”, It is widely believed that this limited and proportional strike is a “one and done” military scenario.

In trading overseas yesterday as the Australian market opened for the week, gold pricing was modestly lower, trading off by about four dollars on the day. Fears that Russia would retaliate for the missile strike subsided as Russia condemned the action but did not react with any military operations at any of the missile launch sites.

Today’s modestly higher gold prices were a result of a lower dollar, and today’s dollar weakness can be attributed to an early morning tweet by President Trump. Trump's tweet said, “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!’

According to Michael Kosares, founder of gold broker USAGOLD, in an interview with MarketWatch, Trump’s tweet resurrected “concerns from late January when Treasury Secretary [Steven] Mnuchin seemed to reverse the traditional strong dollar policy at the Davos conference.”

Traders have once again moved their attention to the current trade dispute with China and the United States as well as any possible (although unlikely) retaliatory move by Russia in regard to this weekend’s military strike in Syria.

The fact that gold pricing remains steady and fractionally higher now that the retaliatory strike against Syrian chemical weapons facilities has concluded suggests not only support for gold pricing in this area but the real potential for gold pricing to continue to trade higher.

Wishing you as always, good trading,