Hawaii Six O - Gary Wagner
Equal Parts of Dollar Strength and Gold Buying Leaves Prices Flat
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold prices continue to be pulled by outside factors such as a strong dollar and dynamic U.S. equities markets creating a favorable and continued risk-on market sentiment. Today traders and investors bid gold prices higher with a strong U.S. dollar of equal force negating any realized gains.
According to the KGX (Kitco Gold Index) as of 4:15 PM Eastern standard time, spot gold is currently trading down $0.10 on the day. On closer inspection, it was dollar strength that created $5.30 worth of headwinds moving gold pricing lower, and trading resulted in an increase of $5.20.
Even with the recent selling pressure in the U.S. dollar, it has lost a little over 2% in value over the last two trading weeks. The value of the dollar index still gained just about 6% since the lows in February when the dollar index was fixed at 88.20.
Now that the last trading day in August has concluded, gold pricing has declined for five consecutive months. During the same period of time, the dollar index has gained in value for the last four consecutive months. In fact, the month of March was the only month this year that resulted in the dollar index losing value.
During the same period, U.S. equities traded to all-time record highs, creating one of the strongest bull market runs, and therefore favorable risk on market sentiment.
The strong growth in US equities coupled with dollar strength have put tremendous pressure on gold pricing. Gold has lost over $150 per ounce in value since April of this year when gold traded to a high just over $1,365 per ounce.
With a high probability that the Federal Reserve will continue its monetary policy of quantitative normalization, it is likely that the dollar will remain strong and gain value throughout the remainder of the year. Add to that the tepid reaction gold pricing has had throughout this year due to geopolitical uncertainty. These factors could continue to weigh heavily on gold pricing throughout the remainder of this year.
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Wishing you as always, good trading,