U.S. equities and the U.S. dollar weigh heavily on gold pricing

There were mixed results in the precious metals today, with extreme dollar weakness providing a tailwind. While gold traded lower on the day, the industrial precious metals including platinum, palladium and silver all closed with gains. The industrial precious metals benefited from the reversal in U.S. equities from negative to positive on the day.

However, the most noteworthy aspect in the precious metals’ futures market today was the exaggerated lows achieved in trading overseas, and with the exception of gold, the recovery from negative to positive territory.

Jitters in equities worldwide created volatility as market participants became more concerned about the potential for a second wave of the Covid-19 pandemic. Platinum futures recovered from an intraday low of $792.40, before recovering and gaining 0.82%, and closing at $825.50. Silver traded to a low of $17.015, before recovering and closing in the positive at $17.505. Palladium briefly broke below $1900, trading to a low of $1889.50, but closing up 0.3% and closing at $1945 per ounce.

Gold futures basis most active August contract closed down by $5.10, and settled at $1732.40. Gold was also under dramatic pressure in trading overseas taking gold futures to a low today of $1706.20. If not for extreme dollar weakness gold would’ve have sustained a much greater drawdown than it did today. The U.S. dollar index lost 0.72%, and closed at 96.63. If not for dollar weakness today gold futures would have dropped by over a full percentage point, rather than the 0.32% lost today.

Overnight gold began to trade under pressure in Europe, as new information indicated that China had lockdown parts of Beijing. China shut down the biggest wholesale food market in Beijing to curtail the rise of new cases of the virus. In fact, according to MarketWatch 36 of China’s 49 new Covid-19 cases were traced to a wholesale market supplies much of the city’s meats and vegetables.

This week’s congressional testimony by the chairman of the Federal Reserve, Jerome Powell will begin tomorrow, and conclude on Wednesday. However, it was steps taken today by the Fed that caused U.S. equities to reverse.

According to MarketWatch, “Stocks rose Monday after the Federal Reserve said it is expanding the scope of its $750 billion emergency corporate debt loan facility to include individual corporate bonds, while also scrapping some earlier restrictions for potential borrowers.”

Although gold did close lower on the day, strong dollar weakness along with the Federal Reserve’s actions curtailed a steep decline. Continued dollar weakness and an accommodative Fed could be supportive of gold pricing later this week.

Wishing you as always good trading and good health,