On an extremely volatile day gold has traded within one dollar of its highest price year to date for 2019. On a closing basis, gold hit an apex or the highest closing price on February 20. Although it traded to a high that day of approximately $1350, gold closed at $1347. That closing price is below the ceiling achieved over the prior two years which was approximately $1370.
Even though gold futures had an intraday high of $1340.90, current pricing is well below that with the August 2019 futures contract currently fixed at $1335.60. The intraday high occurred in overseas trading last night with a large portion of that move being related to U.S. dollar weakness. However as of 4:10 PM EDT the dollar is currently back into positive territory, with gains of almost 3/10 of a percent, and is currently fixed at 97.28. Dollar weakness in the overseas markets took the index to 96.655 before recovering.
Recent statements by Jerome Powell, chairman of the Federal Reserve, as well as James Bullard, CEO and President of the Federal Reserve Bank of St. Louis have revealed a major tipping point in the Federal Reserve’s monetary policy. The tone has once again become much more accommodative and dovish. On Monday James Bullard said that a rate cut may be “warranted soon”. On Tuesday the Federal Reserve Chairman said that the central bank was prepared to facilitate and sustain the economic expansion of the United States.
The current trade war between the United States and China has slowed the economy of both superpowers. In reference to that slowdown as well as the addition of a 5% tariff on Mexico beginning on June 10 Powell said, “We do not know how or when these issues will be resolved … We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”
The recent parabolic rise in gold prices have been factoring in a rate cut and a more accommodative Fed.
The next G20 meeting scheduled to begin on June 28 in Japan will be watched closely for any significant changes in current trade negotiations between the Chinese and the United States. Then in July the Federal Reserve will hold its next FOMC meeting were market participants will listen not only to language but more importantly to any announcements about rate cuts.
These two upcoming events will certainly frame and influence the price of gold as well as the value of the dollar index and shape the global economic forecast through the remainder of the year.
Wishing you, as always, good trading,