Gold Gains Ground Amid Strong Equities and U.S. Dollar

Gold prices closed higher on the week and higher on the day, this in light of a continued risk-on environment and a stronger U.S. dollar. For the 61^st time this year, the S&P 500 has closed at a new record high. This is in alignment with record high closes in the Dow Jones Industrial Average and the NASDAQ Composite. The U.S. dollar closed fractionally higher on the week to overcome Wednesdays sharply lower pricing.

Overall, the fact that gold was able to close higher on the week is quite impressive given a strong dollar and U.S. equities that continued to trade to new record highs.

This week was ripe with economic events such as the Federal Reserve’s final FOMC meeting for the year and tax reform legislation which passed in the Senate. However, it was not until today that information about the upcoming tax cuts was made available to the public. Regardless, U.S. equities moved substantially higher over the week and closed in new record territory.

Gold futures basis, the most active February contract, settled up $1.20 and is currently fixed at $1258.30. Silver pricing closed back above $16 per ounce, gaining over a full percentage point today, with March futures settling at 16.095.

Spot gold gained 1/5 of a percent and as of 4:00 PM Eastern standard time is trading at $1256.37. On closer inspection, spot gold gained $6.50 as buyers bid up the precious yellow metal, but with a strengthening U.S. dollar providing headwinds of -$3.90 resulted in a net gain of only $2.60, according to the Kitco Gold Index.

One of the more interesting facets to this week’s trading activity was the reaction by gold and silver traders to the statement released immediately following the conclusion of Wednesdays FOMC meeting.

Original estimates pegged the probability of an interest rate hike at above 90%. Estimates for the Federal Reserve’s monetary policy next year concluded that there would be a total of three rate hikes implemented by the Fed in 2018. Wednesday’s FOMC statement confirmed original estimates on both the final rate hike this year as well as next year’s monetary policy, commonly called the dot plot.

Given that there was no real change in the underlying fundamentals and that analyst estimates were succinct and accurate, the $16 price uptick on Wednesday was an interesting reaction to the data.

Wishing you as always, good trading,