Gold continues to have solid upward momentum gaining value now for the third day in a row. As of 4:30 PM EDT gold futures basis the most active December contract is currently trading up $9.50 and fixed at $1486.00. This puts the precious yellow metal within striking distance of $1500 per ounce, now a mere $14 from that price point. The last time gold traded at $1500 was April 2013. However, it must be noted that during that time. Gold was falling from approximately $1700 per ounce.
It is the repercussions from the belief that the trade war between the United States and China will get worse before any sort of resolution. There will not be face-to-face negotiations until September. More so last week’s tweet by President Trump has indicated that prior to those face-to-face negotiations the United States will impose additional tariffs on the remaining $300 billion worth of Chinese imports to the United States. The tariff will be set at 10% and could go as high as 25% if there is no quick resolution to the dispute.
According to the CME’s FedWatch tool as recently as one week ago it predicted a 54.2% probability that the federal reserve would initiate ¼% rate cut during the next FOMC meeting which will begin on September 18th. Today the FedWatch tool is predicting that there is an 85.8% probability that the Fed will cut rates by ¼%. This tool is also predicting that there is a 14.2% probability that the Fed will cut rates ½ a percent in September.
Since January of this year gold has gained just over $200 per ounce as it opened at the beginning of the year at $1283 per ounce. Based on the current pricing of $1485 per ounce gold gained roughly 13.6% year to date. This current rally can be characterized as having higher lows for the last six weeks. The vast majority of gains this year began at the end of May when gold began to move sharply higher.
As long as data indicates that the global economic slowdown continues or deepens, we can look for gold pricing to increase in value. As reported by MarketWatch today Matthew Bartolini, head of SPDR America’s Research at State Street Global Advisors said, “With over $12 trillion of negative-yielding debt saturating the market, the relative attractiveness of gold continues to increase. As a result, gold-backed ETFs took in $2 billion in July, making June and July the highest back-to-back inflow months since June 2016,”.
Currently the exchange traded fund GLD (SPDR Gold Shares) has gained 14.6% in 2019. This is a strong indication that market participants are hedging their equity portfolio against further declines, and they are utilizing this fund to include the safe haven asset as part of their portfolio.
Our technical studies indicate that current support for gold can be seen at $1440 per ounce. They are also indicating that there is no real resistance to the key psychological level of $1500 per ounce.
Wishing you as always, good trading,