Hawaii Six O - Gary Wagner
Gold Falls Twenty-Three Dollars from the High Achieved on Monday
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
It was another brutal day for gold prices. Gold futures basis the most active June contract opened at $1285.80 this morning, and after trading to a low of $1274.60 it closed $8.50 lower and is currently fixed at $1277.60. The dollar provided moderate headwinds, as it gained 0.19% in trading today. However, when you consider the decline in gold today resulted in a 0.67% drop in value, selling pressure accounted for most of today’s drop.
Similar results were seen in the cash market today with gold losing a total of nine dollars, which can be broken down with a - 0.2% (- $2.60) decline due to dollar strength, with the remaining – 0.50 % (-$6.40) a direct result of selling pressure. This according to the KGX (Kitco gold index).
One interesting component of today’s activity in the financial markets was the renewed concern about the Chinese and United States trade war deepening. This concern was a primary cause of today’s selloff in U.S. equities. At the same time a dramatic selloff in gold continued disregarding that concern and focusing on strong economic data.
As reported by TheStreet, “Stocks ended a rocky day on a sour note Friday following a report that the trade talks between the U.S. and China had stalled. The talk break-down is a result of the two sides not being able to agree on what to negotiate, leading to uncertainty about when the next round of negotiations will take place.”
Today the University of Michigan’s consumer sentiment index for May revealed a 15-year high. Currently the sentiment index is at 102.4, versus April’s numbers which came in at 97.2. It seems as though market participants decided to focus on the positive economic data and disregard the concerns that moved U.S. equities lower.
According to MarketWatch, “The Chinese government and state media sent a clear signal to markets Thursday and Friday that it is reluctant to resume trade talks with the U.S., when a spokesman for the Ministry of Commerce called the Trump administration’s moves to raise tariffs last week, and the threat of additional tariffs on the roughly $300 billion in annually imported Chinese so far untouched by new duties, “bullying behavior,” that has resulted in “severe negotiating setbacks.”
This dichotomy of how traders reacted in equities, versus how traders reacted in gold was certainly noteworthy. What is crystal clear is that gold was unable to breach the barrier and resistance at $1300 per ounce after achieving it on Monday of this week and opening near that price point on Tuesday. The fact that gold breached $1280 today is also significant in that that price point represents a decline of .618% of the recent rally which began after a double bottom formed during the last week of April. It is for that reason that we could see gold trade lower with our current support target at $1267.70 the lows of the double bottom.
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Wishing you as always, good trading,