Tillerson Exit and CPI Data Take Dollar Lower

Although not a fall from grace, the U.S. dollar lost further ground today in response to the departure of the U.S. Secretary of State Rex Tillerson, as well as the CPI data report. Now for the third consecutive day, the U.S. dollar has traded under pressure to close lower on the day, as well as containing a lower low and lower high than the previous session.

As of 4:00 PM Eastern standard time, the dollar index is trading off by 18 points and currently fixed at 89.695, which is a net decline of 2/10 of a percent.

In an interview with MarketWatch, David Madden, market analyst at CMC Markets, said, “The inverse relationship between gold and dollar remains strong. Overall, volatility in the gold market has been low. The metal has been on a downward trend since late January, and with the possibility of an interest-rate increase from the Federal Reserve this month, we could see continued pressure on the commodity.”

The consumer price index for February came in well within current estimates at 0.20%, which continued the bearish pressure witnessed recently in the dollar. February’s gains were extremely mild when compared to the 0.50 % increase witnessed in January.

This report and the departure of Secretary of State Tillerson combined put moderate pressure on the dollar index taking it into an intraday low of 89.50 before recovering slightly.

It was dollar weakness that is directly responsible for the majority of the gains seen in gold pricing today. While there was a modicum of buying associated with today’s move, it was a continued decline in the dollar that moved gold pricing.

Spot gold is currently fixed at $1,326 per ounce, which is a net increase of $3.40 on the day. According to the Kitco Gold Index, today’s gains included $0.60 as a direct result of buyers bidding up gold prices, and the remaining gain of $2.80 directly attributable to a weakening U.S. dollar.

Gold futures basis the most active April contract is currently bid up by $5.20, which is a net gain of almost 4/10 of a percent and fixed at $1,326 per ounce.

On a technical basis, we currently see minor support for gold at $1,317 which is the 38% retracement, with major support at $1,302 per ounce, the 50% retracement. Gold pricing today did move moderately higher. However current pricing still remains below its 50-day moving average currently residing at $1,`1330.40. This level must be taken out on a closing basis for bullish sentiment to begin to resurface.

Wishing you as always, good trading,