Hawaii Six O - Gary Wagner
U.S. Dollar At A Critical Price Point
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The U.S. dollar continues to trade under pressure and is now at a critical support level. The dollar index has lost almost half of a percentage in value today and is currently fixed at 88.54. If the dollar continues to trade at this level, it will mark the eighth consecutive week in which it has closed below its opening price on Monday.
Beginning in mid-December of last year, the dollar went into a freefall. In fact, the week of December 4th marks the last time the dollar index traded higher on the week. Cumulative damage to the index has resulted in a 5% decrease in value since mid-December.
On a technical basis, current pricing puts it at a critical support level, which, if substantially breached, could signal an accelerated meltdown in dollar index value.
Critical support is currently residing at 88.58, which is a 61.8% Fibonacci retracement for a large data set which begins in the fourth quarter of 2013 when the index was trading at roughly 79. It ended at the beginning of 2018, when the dollar index reached its recent price apex just below 104.
If the dollar index is not able to hold current pricing, we could easily see a further decline of 2 to 3% in the short term which would take the index to 84 or 85.
It is no coincidence that in mid-December when the dollar began to fall, gold began to rally. Gold prices have effectively moved from the lows of mid-December at $1238, to recent highs above $1360 per ounce. These gains are primarily a net result of a falling U.S. dollar.
If, in fact, the U.S. dollar does break below the critical support level it currently resides at we could easily see gold prices gain 2 to 3% which would take the elusive yellow metals pricing to just about $1400 per ounce.
Today, for example, as of 3:00 PM Eastern standard time, spot gold is currently fixed at $1346.10, a gain of $1.10. However, on closer inspection, gold prices gained $7.00 is a direct result of a weakening U.S. dollar today, with selling pressure subtracting $5.90. This according to the Kitco Gold Index.
Gold futures basis, the most active April contract, is currently fixed at $1351 which is a net gain $8.00 on the day. Any recent downside pressure in gold seems to have subsided. In fact, over seven of the last eight weeks have resulted in gold closing higher on a weekly basis. With the dollar continued to trade under pressure, this is a trend we expect to continue.
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Wishing you as always, good trading,