Strong Headwinds from US Dollar Strength Continue to Weigh on Gold

Considering outside market forces such as dollar strength and higher U.S. equity pricing, gold pricing has held up rather well. In an environment which strongly favors the risk-on asset class over the safe-haven class, gold has traded with a higher daily low for the last four consecutive trading days. Today’s trading range was modest, but pricing did trade to a more elevated high than it did on Friday.

The most significant market force currently working against gold pricing has been dollar strength. Since April 17, the dollar has been moving consistently and consecutively higher, trading from just under 90.00 to its current pricing at 92.61. That amounts to over a 2 ½% increase in value that has had a directly proportional adverse effect on gold pricing.

Gold was fixed at $1,349 on April 17 and is currently lower by approximately $35, presently trading at $1,314.60. The $35 decline in gold pricing amounts to just over a 2 ½% decrease in pricing. This clearly illustrates that over the last three weeks gold prices have held steady and the net declines have been a direct result of almost all dollar strength.

As reported in MarketWatch, Naeem Aslam, chief market analyst at ThinkMarkets, said, “The dollar has gained and gold declined amid evidence in speeches from select Fed officials that they’re open-minded to more aggressive interest-rate action even if the official line at the central bank is for a slow approach to reversing easy-money policy.”

At the same time considerations about President Trump’s decision on the Iran agreement (which will be announced at 2 PM Eastern standard time tomorrow), as well as the ongoing trade dispute between the United States and China continue to be potentially bullish for gold pricing.

Although the future gold pricing will undoubtedly contain a reaction to future actions by the Federal Reserve, the presidential decision on the Iran deal, and the ongoing trade dispute between the US and China, it is dollar strength or dollar weakness that will continue to have the most influence.

Wishing you as always, good trading,