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Multiple Factors Continue to Pressure Gold Pricing

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Three key elements continue to put pressure on gold. First and foremost is the fact that U.S. equities continue to rally and go to new all-time record highs. Second is an optimistic overtone that a U.S. China trade deal may be forthcoming. Lastly the U.S. dollar continues to gain strength.

As of 3:45 PM EST gold futures are priced at $1453.80, after factoring today’s $6.50 decline (-0.45%). Silver futures are down over 8/10 of a percent, and with a decline of $0.14 is at $16.905 per ounce.

We can clearly see the influence of U.S/ dollar strength today when we look at spot gold pricing. Currently spot gold is at $1454.30 per ounce, down $7.00 on the day. According to the KGX (Kitco Gold Index) selling pressure accounts for $4.80 of today’s decline, with the remaining decline of $2.20 directly attributable to a strengthening U.S. dollar.

According to Reuters, “Gold fell on Wednesday as equities climbed to record levels bolstered by hopes that the United States and China were close to signing an initial trade deal and by the release of robust U.S. economic data.”

Reuters spoke to Bart Melek head of commodity strategies at TD securities who said, “Given the situation, the statements from the White House that the U.S.-China trade deal him may be imminent is continuing to drive risk appetite a bit higher. There is less interest in gold as a hedge, and a higher opportunity cost to hold zero yielding assets like gold.”

Reuters also mentioned the current monetary policy of the Federal Reserve saying, “The absence of signs of further monetary policy easing in the near term by the U.S. Federal Reserve did little to support gold. Fed Chair Jerome Powell said on Monday that monetary policy was "well positioned" to support the strong U.S. labor market.”

Our technical studies indicate that we are currently at a critical level of support which resides at approximately $1450 per ounce. This corresponds to the 38.2% Fibonacci retracement. The data set for this retracement begins at $1270 per ounce and concludes at $1565. If this level does not hold the next logical major support level would be $1418 per ounce. That is the 50% retracement level of the same data set.

Our studies also suggest that current resistance for gold sits at $1481 per ounce. This is the 28.6% Fibonacci retracement level. Lastly it is also important to note that the Thanksgiving holiday weekend begins tomorrow. We have seen multiple occasions when traders have used the shortened session on Friday to take advantage of the extremely light volume and moved the market due to the increased volatility that comes from light volume.

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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.