U.S. dollar moves higher forcing gold lower

Global concerns about the increase of new cases of the novel coronavirus in Europe as well as the United States have had a dramatic impact on both U.S. equities and gold yesterday. Both equities as well as gold were sharply lower in trading yesterday. While equities in the United States recovered today, gold pricing on the other hand, continued to decline.

The recent uptick in Covid-19 infections has raised concerns about businesses shutting down in Europe as well as in the United States. This moved market sentiment to favor the U.S. dollar as a safe haven asset of choice. Since the beginning of September when the dollar index hit a low of 91.65, the dollar has gained roughly 2.34%.

As reported in MarketWatch, “Rising cases in Europe and in the U.S. have unsettled investors about the global economic recovery, driving investors into dollars, which has weighed on bullion…European countries, including France, Spain and the U.K., are grappling with rising coronavirus numbers, and U.K. Prime Minister Boris Johnson introducing new restrictions to stem the spread of coronavirus, including 10 p.m. curfews for pubs and restaurants in England, in a reversal from the summer relaxing of coronavirus restrictions.”

Cash is king, but both gold and the dollar continue to be safe haven assets of choice

Today It was all about dollar strength pressuring gold to lower pricing. However, gold maintained and held above a key and critical psychological support level at $1900 per ounce. Yesterday, gold opened at $1956, when dollar strength along with strong selling pressure from market participants took pricing well below that key support level of $1900 trading to an intraday low of $1885 before recovering.

Today gold futures basis the most active December 2020 contract settled at $1905.80 which is a net decline of $4.80 (– 0.25%). It traded to a high of $1925.50, and a low of 1898.90 before closing. It was dollar strength that was primarily responsible for today’s decline. Currently the dollar index is at 93.985 after gaining 30 points (+0.32%) on the day.

Dollar strength is also apparent in spot gold pricing. According to the KGX (Kitco Gold Index) physical gold closed at $1902, after sustaining a drawdown of $10.40. Dollar strength accounted for $8.60 of the decline, with selling pressure taking away an additional $1.80.

Wishing you as always good trading and good health,