Modest Gains in White Precious Metals and Modest Losses in Gold

August 9, 2018 - 6:06pm

 by Gary Wagner

A strong U.S. dollar has tempered any real upside move in the precious metals markets today. Although traders are currently bidding up the all the precious metals, only silver, platinum and palladium have closed with positive gains. This can very well be explained as the three precious white metals all have intrinsic industrial value, and as such are reacting favorably to recent economic data.

Gold is lower as dollar gains today have dwarfed gains achieved in normal trading.

The dollar is surging in trading today as it has gained over a half a percent of value, with the index currently up +0.58.5 points and fixed at 95.470 (+0.605%) as it gains value against a basket of foreign currencies. The dollar has been flirting with a major resistance area found at 95 since the end of May this year. This is the highest value the dollar index has had this year. In fact, the last time the dollar index traded at this level was at the end of June 2017.

Dollar strength seems to be highly predicated upon robust economic data such as the core PPI, which rose 0.3% for the second consecutive month, as well as data revealing a drop in jobless benefit applications. This information combined increases the likelihood that the Federal Reserve will initiate two more rate hikes this year followed by three hikes in 2019.

On May 28, the index hit an intraday high of 94.99 before trading lower on the following day. On June 14, the dollar index opened at approximately 93.50 and after trading to an intraday high ticks just below 95 and closes at 93.75.

Since that time there would be nine occasions in which the dollar index would briefly trade above 95, with three of those occurrences resulting in the dollar closing above 95. Most recently, on August 6 and August 7 the index closed above resistance at 95, although yesterday’s action resulted in a slight decline in the dollar index closed at 94.96.

This solid spike and close above 95 on the index could very well be indicating that the former level of resistance will now become support.

Dollar strength has undoubtedly limited any upside potential in gold today. As of 4:10 PM Eastern standard time, gold futures, basis the most active December contract, is currently down by $1.40 and fixed at $1,219.60.

Spot gold is currently fixed at $1,211.70. On closer inspection, we can see that buying outweighed sellers in the market today with a net result of a $4.50 gain based upon trading activity. However, dollar strength has not only eroded all of these gains but moved gold pricing $6.30 lower on the day putting prices down $1.80 today.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
See market forecast for outlook
Maintain short  December gold @ 1217. Maintain stop at 1227
Gold Market Forecast

This is an aggressive sell signal as on a technical basis we could see support at this level. That being said it has been a fundamentally driven market with dollar strength guiding the bearish outlook. Ddollar weakness over the last two days was drawfed by the large upside spike in the dollar index today. Any real change to our long term outlook requires the fundamentals at play to dramatically change.