Trading to a high of $1415.40 in intraday trading today, gold futures basis the most active August contract not only traded to a new record high for this year, but closed above $1400 per ounce. As of 4:10 PM EDT August futures are currently fixed up $6.00 at $1402.90. That is a net increase of +0.42%. While there are many underlying fundamental factors one of the largest influences recently has been a weakening U.S. dollar.
Today the dollar index is off by almost 0.5% and fixed at 95.705. So as far as the futures markets are concerned dollar weakness is absolutely the primary cause of today’s increase in gold pricing. However as far as spot or physical gold goes gains today could be attributed to both dollar weakness as well as buyers bidding up the precious yellow metal. According to the KGX, spot gold currently $1398.80, showing a net gain of $10.90 on the day, normal trading contributed $4.65 with the remaining $6.25 a direct result of dollar weakness.
Besides dollar weakness and a stronger gold pricing is due to the belief that the Federal Reserve will implement an interest rate cut at July’s FOMC meeting. There is also the European Central Bank and statements made by its president Mario Draghi, who according to Reuters gave a dovish monetary policy message to European Union leaders on Friday, saying that “Any deterioration in economic conditions that would threaten a return to the ECB's inflation would trigger additional stimulus from the bank.”
There is the recent incident in which Iran shot down a U.S. drone. Trump’s response is still not known. Yesterday it was reported that he had planned a strike but later decided against it. Any response could provoke the Iranians, making any measured response difficult at best. Lastly there is still the trade war which threatens the global economy.
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Wishing you as always, good trading,