Traders Welcome the New Year with a Strong Dollar and Higher Gold Prices
Traders returned from an extended holiday weekend as they welcomed the first trading day of 2019. As we saw last year, extreme volatility in U.S. equities was the norm rather than an exception. Trading under pressure early in the trading session, the Dow Jones Industrial Average broke 23,000 and traded to a low of 22,928 before recovering, with a net decline of 386 points. The Dow actually moved into positive territory briefly when it traded to its high today of 23,413, resulting in a 86 points gain temporarily. By the close of today, the Dow gained 18.83 points on the day, in essence unchanged, and is currently fixed at 23,346 points.
Dollar Surges Limiting Any Strong Upside Move in Gold
Asian as well as European equities traded mostly lower. According to Reuters, “Factory activity weakened across much of Europe and Asia in December as the U.S.-China trade war and a slowdown in demand hit production in many economies, offering little reason for optimism as the new year began.”
As of 5:00 PM Eastern standard time, the dollar index maintains extreme strength and is currently up 65 points and fixed at 96.39. This strength curtailed any real gains in gold pricing today. Spot gold closed up by $0.20 today and is currently fixed at $1282.30.
Technical buying was strong and moved the price of spot gold higher by $9.70. However, after factoring in dollar strength which had a negative impact on gold pricing of $9.50, spot gold, in essence, closed unchanged on the day.
Gold futures basis the most active Comex February contract traded to a high today of $1,291 per ounce, and finished moderately higher with net gains of about a third of a percent resulting in a $4.10 gain, and is currently fixed at $1,285.40.
Our technical studies currently indicate that gold pricing has solid, but minor support at $1,275.80 and major support at the 200-day moving average which currently is fixed at $1,255.60. Our studies also indicate that there is some resistance at $1292.10, the 0.618% retracement, with major resistance at $1300-$1312 per ounce. Many analysts, including myself, believe that a close above 1,300 would result in a strong push to higher pricing as more traders enter the market from the long side. If gold can trade and close above that price point, we could easily see prices reach as high as $1,325, the 0.78% Fibonacci retracement.