Trade War Worries, FOMC Countdown, and Dollar Weakness Guide Gold Pricing

Multiple factors continue to influence gold pricing which has been under dramatic pressure since the beginning of April when gold traded to its highest value this year at $1,370. Gold futures closed below $1,200 per ounce in trading activity yesterday, but today’s fractional gains have moved pricing back above that key psychological level.

Currently, gold futures basis the most active December Comex contract is $3.60 higher and fixed at $1202.70. A combination of dollar weakness and traders bidding up the precious yellow metal are responsible for these gains.

Spot gold has gained $5.60 in trading today. According to the KGX (Kitco Gold Index), the majority of today’s gains is a direct result of dollar weakness contributing $3.45, with the remaining $2.15 attributed to traders buying.

One interesting facet of today’s moderate gains is that trade wars worries have been mentioned by multiple analysts as a positive influence on gold pricing, suggesting that gold is once again acting as a safe-haven asset.

As reported in MarketWatch, staff reporter Mark DeCambre said, “Worries about tariff disputes, notably between the U.S. and its longstanding Canadian counterparts and clashes between Washington and Beijing, with China tariffs set to kick in this week, have unsettled investors.”

Although gold prices are fractionally higher on the day, technical resistance at $1,218 per ounce will most likely continue to limit any real strong upside gains. After trading to an intraday low at $1,164 on August 15, gold prices pushed higher until Thursday of last week when gold pricing hit an intraday high of $1,218 and then closed lower. This was followed by two days of selling pressure on Friday of last week, and Tuesday when traders returned from a three-day weekend. Today marks the first trading day in September to finish higher.

Countdown to FOMC

As of 4:17 PM Eastern standard time, there are only 20 days, 21 hours, and 43 minutes until the next Federal Reserve’s FOMC meeting. Currently, the CME’s FedWatch tool predicts that there is a 99% probability that this month’s meeting will result in another interest rate hike. The question becomes whether or not a rate hike has been fully factored into current market sentiment. A rate hike would most likely be favorable to dollar strength and thereby limit any major upside moves in gold.

Wishing you as always, good trading,