One Part Dollar - One Part Sellers

After trading to the top of a very narrow and defined trading range yesterday, gold prices have softened slightly and are now moving back towards the center of this range. For the last two weeks, gold prices have been stuck between a support level of $1262 and a defined resistance level at $1282.

As of 330 EDT, spot gold is currently fixed at $1276.80 per ounce, which is a decline of $4.70 on the day. According to the Kitco Gold Index, today’s decline can be seen as almost equal parts of sellers and a strong dollar. Today’s -$4.70 decline is composed of $2.20 of value lost due to a strengthening U.S. dollar and $2.50 of value lost due to predominant selling in the market.

Gold futures are trading in a similar manner and are currently down $4.30 on the day, with the most active December’s contract currently fixed at $1277.20.

While it seems quite evident from recent price action that there is tremendous support for gold at $1262 per ounce, recent action highlights the strong level of resistance at $1282.

One major obstacle that gold is facing is the fact that equities have been gaining value globally, with the Dow Jones U.S.  hitting 58 new record high on a closing basis since Trump was elected president. The risk-on environment continues to dominate market sentiment as traders and investors continue to experience dynamic returns on their equity portfolios.

Another major obstacle gold faces is the relative calm geopolitical overtones that have been evident over the last couple of months. The rhetoric that existed between the United States and North Korea has calmed down and other geopolitical hotspots have, at least for now, become inactive.

Inflationary pressures also seem to be put at a minimum, and interest rates continue to be low. These factors combined have created an economic environment in which money flow continues to move into equities.

These factors combined have continued to keep gold prices in a tight trading range where it has been unable to break above $1285, but also unable to trade below $1262 which is the 200-day moving average.

Inasmuch as gold has been trading under pressure after reaching its highest value this year, the fact that this recent selloff has resulted in gold trading above the 200-day moving average underlines the fact that there is support for the precious yellow metal.

Wishing you as always, good trading,