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Dollar Strength Continues to Weigh on Precious Metals Pricing

Commentaries & Views

Gold, silver and platinum have closed lower today. However, gold is the only precious metal to have any kind of selling pressure. Traders have bid the precious yellow metal fractionally lower today (-$0.40). Both silver and palladium had fractional upside ticks in terms of the buy side of the equation.

All four precious metals were weighed down today due to dollar strength. The net result was that three out of four closed lower on the day. The exception to this trend was palladium. Physical palladium is currently fixed at $979 per ounce, with a net gain of $7.00 on the day.

This all according to the KGX (Kitco Gold index), which details net changes of precious metal pricing into its two primary components: dollar strength or weakness and buying versus selling.

Gold has now fallen for two consecutive days, trading to the lowest value in the last five weeks. The vast majority of recent gains can be directly attributed to dollar strength. The US dollar index gained almost a half percent in trading today, and is currently fixed at 91.385, after gaining 43 points in trading today.

Seven of the last eight trading days have resulted in higher values in the US dollar index. After hitting a low of 88.49 on April 17, the dollar has climbed 336 points, a net gain of 3.3%. Dollar strength has been the primary cause of recent weakness in the precious metals complex.

Recent dollar strength has taken current pricing well above the former level of resistance of 91.00. This resistance level was taken out easily in trading this week, as the dollar gained 1.2% of value since Monday.

In an interview with MarketWatch, Rob Haworth said “Ultimately rising real interest rates in the U.S. and a stronger U.S. dollar are placing gold under pressure at month’s end. Should the stronger U.S. dollar trend be sustained, especially by higher real U.S. interest rates or rising expectations of additional Federal Reserve interest rate increases this year, gold prices may see further pressure into May.”

On a technical basis there is more a resistance at 91.56, with major long-term resistance at 94.53. Major support for the dollar was formally at 88.58, however this week’s uptick has moved that support level to 91.00. The former resistance level has now become support.

For those who would like more information, simply use this link.

Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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