Gold prices began trading overseas yesterday with solid and modest gains, trading up a few dollars as it flirted with $1299-$1300. After trading to $1300 before backing off over the last two weeks, it seems the third time is the charm. As of 4 o’clock EDT, gold futures are trading sharply higher at $1317, a net gain of $19.10.
Although there are multiple factors for the most recent upside breakout in gold, the U.S. dollar is not one of the primary causes. According to the Kitco Gold Index (KGX), spot gold is currently trading up $20 on the day. Of this $20 gain, $3.60 is directly attributable to a falling and weak U.S. dollar. However, the other $16.40 of net earnings today can be attributed to investors and traders bidding up the precious yellow metal.
This most recent price ascent began on Friday, as market participants and analysts began to digest and glean information from speeches made by both Janet Yellen and Mario Draghi. Draghi’s speech made it crystal clear that he is in no hurry to conclude the current quantitative easing program and monetary stimulus in the European Union.
Yellen’s speech was devoid of any news relating to a timetable for rate hikes or the initiation of their balance sheet liquidation. This put more emphasis on minutes released from last month’s FOMC meeting, which contained a much more dovish tone than previous Federal Reserve statements.
In an interview with Bloomberg Markets, Phil Streible, senior market strategist at RJO Futures in Chicago said, “The Fed may be a little bit more cautious in their stance on raising interest rates for the remainder of the year. There are a lot of uncertainties out there.”
The combination of the Federal Reserve and the European Central Bank continuing to have easy access to money via a robust monetary stimulus program, and the unlikelihood that these policies will change in the very near future, has been a substantial factor in moving gold prices higher.
Momentum has been building as gold prices have oscillated between $1200 and $1300 per ounce for the better part of 2017. After two distinct failures to reach the $1300 per ounce mark, today’s attempt was successful, dynamic, and strong as gold prices surged above 1300, and more importantly closed well above that price point.
Wishing you as always, good trading,