Hawaii Six O - Gary Wagner
Traders React To Trump's Announcement To Pullout Of The Iran Deal
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Once again, a strong U.S. dollar has curtailed any sustained upside move in gold. Today, for example, traders bid up spot gold by $5.20. However, dollar strength took away $4.60 of that move. This resulted in gold pricing gaining only $0.60 in the physical market, according to the Kitco Gold Index (KGX).
Gold prices did, in fact, firm in trading today after President Trump said that he is canceling the Iran nuclear agreement. It was widely believed the Trump would pull out of the agreement. However, until it was officially announced, traders and market participants largely disregarded the repercussions of this announcement, with the exception of recent sharply higher oil pricing.
According to the New York Times, “President Trump declared on Tuesday that he was pulling out of the Iran nuclear deal, unraveling the signature foreign policy achievement of his predecessor, Barack Obama, and isolating the United States among its Western allies.”
“This was a horrible one-sided deal that should have never, ever been made,” Mr. Trump said at the White House in announcing his decision. “It didn’t bring calm, it didn’t bring peace, and it never will.“
While this news is bullish for gold, it seems at least for now that it is incredibly bullish for the U.S. dollar also. As such, today’s activity is resulting in a strongly higher U.S. dollar and modestly higher gold pricing.
As of 4 PM Eastern standard time, gold futures are trading up $0.80 on the day and currently fixed at $1,314.80. This extremely modest uptick has occurred after gold traded under dramatic pressure in overseas trading last night. Gold prices traded to a low of $1,306.20 before recovering.
The lows achieved in intraday trading came within $0.10 of the 200-day moving average which is currently residing at $1,306.10 a support level that has been tested throughout the last five trading days and held. Gold prices did break below the 200-day moving average briefly on April 30 and traded to a low $1,302 before recovering.
On a technical basis, the intersection between the 200-day moving average and a 50% Fibonacci retracement has been a key and critical area of support. Recent upticks in gold pricing have widened the gap between those two technical indicators with the 200-day moving average moving higher. The net result is that the 200-day moving average is four dollars above the Fibonacci retracement at $1,302.
The ultimate repercussions from today’s announcement will be factored into market sentiment over the next few days. Traders will also need to include negotiations with North Korea, with a summit planned to occur in the next several weeks.
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Wishing you as always, good trading,