Dollar Weakness Overcomes Modest Selling Pressure

January 7, 2019 - 5:33pm

 by Gary Wagner

Gold futures have staged a modest recovery today, with the most active Comex February contract with one hour left in trading is $2.60 higher at $1288.30. Today’s gains come after Friday’s dynamic selling pressure which resulted in a decline of over $10 per ounce. Friday’s trading range was also exaggerated with the intraday high trading just above $1300, and a low of $1278 per ounce.

If not for dollar weakness, today gold would actually be trading lower as witnessed by the Kitco gold index which is currently fixing spot gold at $1286.60 per ounce. In terms of selling pressure traders bid the precious yellow metal lower by $4.30. However, after factoring in the positive change due to dollar weakness which amounted to $6.70, spot gold is $2.40 higher on the day.

Dollar weakness today is a result of a combination of a strong euro dollar as well as strength in the British pound. Both the euro and British pound gained strength today on optimism regarding next week’s Brexit vote. Another factor adding selling pressure to the dollar index is statements Federal Reserve Chairman Jerome Powell made on Friday. In essence his statement alluded to the real possibility that the Fed will ease current monetary policy in terms of interest rate hikes this year.

Currently the dollar index is trading off by half percent and currently fixed at 95.275. The British pound is up a quarter percent and currently fixed at 1.2815. The euro is showing strong gains today of almost three quarters of a percent, and is currently fixed at 1.14765.

U.S equities are trading higher across the board with the NASDAQ composite leading percentage gains today, with the tech heavy index currently up 1 ¼% and fixed at 6823. The Standard & Poor’s 500 comes in second with gains today of just over .9% and is currently fixed at 2552.28. Lastly the Dow Jones industrial average is showing gains of .64%, with the addition of 154 points it is currently fixed at 23,588.

On a technical basis we continue to see strong and dynamic support in gold at approximately $1275.80 per ounce. This number reflects the .38% Fibonacci retracement. Our studies also indicate that resistance at $1300 to $1312 remains strong.

Currently gold is well above its 200-day moving average which is currently fixed at $1255.10. Most impressive is the convergence of the 50-day moving average and the 200-day moving average which are now a mere seven dollars apart. Continued strength in gold pricing would cause the 50-day moving average to cross above the long-term 200 day moving average creating a pattern called a golden cross. At the end of November last year, the 50-day moving average crossed above the 100-day moving average which triggered an aggressive upside move in gold pricing. Gold was trading at $1217 before the 50 – 100-day golden cross occurred.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
Thursday, December 20 we went long Feb gold @ 1268.50 with a stop we raised to @ 1270.13
Maintain long Feb gold and stop* 
*We will raise stop later this week
Gold Market Forecast

Although in today’s gains in gold pricing is entirely due to dollar weakness, it indicates the real potential for further upside price gains this week. While we still see resistance at $1300 per ounce, it is likely that we will see yet another attempt to breach that significant psychological level. Above that level we see real resistance at $1312, which is based upon a Fibonacci retracement level.