A Tough Week for Gold

Today’s modest price increase has had little effect on the weekly tally. As of 3:30 PM Eastern standard time, gold futures (August 2018 Comex contract) are trading $1.80 higher on the day, and currently fixed at $1252.80. Considering gold opened on Monday at approximately $1,272 per ounce, this week’s activity resulted in a decline of $20.

Today’s modest advance is not based in any part on buyers bidding up gold pricing. Instead, it is a combination of moderate selling pressure and the U.S. dollar trading lower on the day.

Physical gold is currently fixed at $1,251. According to the Kitco Gold Index (KGX), today’s modest advance contains a decline in pricing of $5.50 directly attributable to traders actively selling gold. It is dollar weakness that has more than compensated for selling pressure adding $8.50 value. The net result is a modest advance today of three dollars.

On a technical basis, the completion of a ‘Death Cross’ pattern on Monday may have signaled the point in time in which a short-term correction has now become the beginning of a bear market. On Tuesday gold prices opened at 78% retracement, which is fixed at $1,267 and closed well below that price point at $1,260. The fact that gold closed below this support level also was an indication of potentially lower pricing.

As reported by MarketWatch, Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said that gold prices are “likely to remain under pressure for much of the next quarter.  We believe the Fed remains on a path of higher interest rates and balance sheet run-off, providing support for the U.S. dollar and pressuring gold prices.”

Given the existing trade dispute between the United States and China, Canada, and the EU, the safe-haven aspect of gold has certainly not been prevalent in current market sentiment. At least for now, gold has lost its safe-haven luster.

It is dollar strength that has been the underlying force taking gold pricing lower. Since the lows of February, the dollar has gained almost 6% in value. Gold has incurred a great price decline during the second quarter of 2018, losing 5.5% in value.

It will be dollar strength or weakness that will be the most significant influence on gold pricing during the next quarter. This week the U.S. dollar index traded and closed above 95, which is a long-standing major resistance price point. Up until today, the dollar had been fractionally above that price point. The U.S. dollar lost almost 8/10% in trading today, closing at 94.35.

Wishing you as always, good trading,