Despite Dollar Weakness Gold Cannot Overcome Selling Pressure

Gold continues to trade under pressure, closing lower on the day and in essence unchanged on the week. As of 4:45 PM EDT gold futures are trading off by $4.60 a net decline of - 0.31%, and fixed at $1493.70.

At the same time the U.S. dollar is trading lower currently down - 0.35%, with the dollar index currently at 96.955. For the last four trading days the index has lost dramatic ground. The net results this week from the dollar index was trading just above 98.00, and is now trading at 96.985.

Spot gold is currently fixed at $1490.30, which is after factoring in a net decline today of $1.20. On closer inspection we can see that dollar weakness actually added $4.80 worth of value per ounce, however normal trading bid the precious yellow metal lower by six dollars, this according to the KGX (Kitco Gold Index).

What is clear is that without dollar weakness this week gold prices would have had a much larger and dramatic price decline. This indicates that market participants and traders are still selling gold.

Even though this week has revealed some real uncertainties in the trade agreement reached last Friday in Washington between the United States and China, there is guarded optimism that the two superpowers are moving closer to a resolution that has plagued the global economy for the last 15 months.

On Friday of last week, it was announced that both the United States and China had come to some common ground which simply needed to be put to paper and then signed by presidents of both countries. This agreement has been tentatively called “phase one”, as it is a partial agreement.

However, the pure optimism expressed by both countries a week ago Friday has gone through a series of changes and clarifications. Beginning on Monday when the Chinese media announced that they would not sign the agreement until both sides met again. This obviously indicates that there are portions of the agreement that need more clarification, or some sort of a rewrite.

Yesterday China fulfilled part of “phase one” agreement via purchases from the United States. China’s commerce ministry confirmed that they are working on finalizing the agreement with President Trump that include significant purchases of U.S. agricultural products.

According to Reuters, “White House trade adviser Peter Navarro on Friday pointed to next month’s Asia-Pacific Economic Cooperation (APEC) forum in Chile as the Trump administration seeks to formalize its “phase one” trade pact with China.”

Market participants as well as traders are uncertain as to what  “spin” is being placed on information being released by Washington and Beijing, and the truth in terms of the content and context of the agreement reached a week ago. Very few details as to the exact wording and components of this “phase one” trade agreement have been released by either side.

What is important is that the two sides are once again talking and at the negotiation table. The devil will always be in the details but there cannot be a resolution and an end to the trade war unless there is negotiation, and a willingness to compromise on both sides, which seems more apparent this week.

Wishing you as always, good trading,