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No Luster Lost in Gold’s Shine

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After selling off and gaping lower on the open in Australia forty-eight hours ago and trading to a low of $1385, gold quickly recovered with today’s dramatic gain of $27. As of 4:19 PM EDT, gold futures basis the most active August contract is currently fixed at $1417.10 which is a net gain of $27.80 on the day. This amounts to a 2% gain in gold pricing in a single day.

Apparently whatever bearish sentiment unfolded immediately following the G-20 meeting in Osaka, Japan last week quickly diminished as extremely bullish market sentiment returned. Without a question this one will certainly be remembered by gold traders and investors for some time to come. Not only did gold pricing quickly recover, it is now trading roughly 4 dollars above Friday’s closing price.

Today’s dramatic recovery is almost entirely based upon bullish market sentiment with only a fractional gain attributed to dollar weakness. This is definitely apparent in physical gold pricing today. According to the KGX (Kitco Gold Index) Spot gold as of 4:24 PM EDT is currently fixed at $1413.50, a net gain of $29.80 on the day. On closer inspection we can see that only $0.70 of today’s dramatic gain was attributed to a weakening U.S. dollar, with the remaining gains of $29.10 directly attributable to bullish market sentiment resulting in investors bidding the precious yellow metal higher.

Today’s dynamic gains are once again occurring in tandem with gains in U.S. equities. All three major indexes scored moderate gains in trading today with the Standard & Poor’s 500 gaining .29%, the Dow gaining .26% and the NASDAQ composite gaining .22%.

Typically, there is an inverse relationship between gold and equities. Equities are considered a risk-on asset, and gold solidly footed as a safe haven asset. By definition these two asset classes gain or lose value for completely different financial reasons. However, there are a few exceptions to this rule, with one being sensitivity to interest rates. Both asset groups will react favorably with a bullish demeanor based upon falling interest rates.

The outlook for weaker global growth is fueling the market sentiment which is reacting to the possibility that the Federal Reserve along with global central banks will still initiate rate cuts this year to continue the global economic expansion. Other analysts have cited a re-evaluation of this weekend’s one on one talks between Trump and Xi Jinping. Even with the trade war truce still in play, many analysts believe that the current trade war is still far from over. Although this weekend’s talks did not escalate the current dispute it did not resolve any of the long-term issues which have plagued the two superpowers from being able to negotiate an amicable resolution for both countries.

All things being equal gold pricing lost no luster long-term and has once again returned to its extremely bullish demeanor which has taken prices approximately 8% higher this year. In fact, gold which opened at roughly $1260 in January of this year is now solidly higher by approximately $161 giving us a net result of 8.8% yearly gains.

Wishing you as always, good trading,


Gary S. Wagner - Executive Producer