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Gold and U.S. equities continue to run in tandem, but to the downside today

Commentaries & Views

After trading higher for six of the last seven trading days, gold futures closed sharply lower on the day. After trading to a low today of $1715.30, gold recovered approximately 1/3 of today’s drawdown and is currently fixed at $1726.70 (-1.45%), ending up with a loss $25.40.

All of the other precious metals that trade on the futures exchange were lower on the day. Platinum declined the greatest, the precious white metal gave up $67.60, which is a decline of 7.23%, resulting in platinum futures currently fixed at $866.90. Palladium futures came in second in terms of percentage drawdown. Today palladium lost 4.19%, a total drawdown of $90.40, and is currently fixed at $2069. Following palladium is silver which gave up 3.25%, a total drawdown of approximately $0.59 and is currently fixed at $17.445.

Today’s dynamic selloff in the precious metals was partially due to dollar strength. However, it was only minimal when compared to the total percentage decline of each precious metal. The dollar index traded 0.27% higher and is currently fixed at 99.40.

Spot gold is a perfect example of the minimal effect that a stronger dollar had today. According to the KGX (Kitco gold index) physical gold is currently fixed at $1727.50. Today’s decline totals $20.90 of which $16.70 is directly attributable to traders selling the precious yellow metal. Dollar strength accounted for the additional drawdown of just $4.20.

It is noteworthy that both precious metals as well as the U.S. equities markets moved in tandem again, but in today’s case they both moved in tandem to lower pricing. While the typical correlation between these two asset classes is a negative correlation, there are instances when both equities and gold move in tandem to the upside.

This occurred in 2008 when the Federal Reserve began to speak about quantitative easing, and continued throughout the middle of 2011 as both gold and silver both moved higher. In a similar manner we have seen both equities and gold run in tandem after the Federal Reserve began its more accommodative stance and reignited quantitative easing, after lowering their interest rates to near zero.

Today U.S. economic data on the number of Americans that applied for unemployment totaled 4.4 million, however on an adjusted basis first time unemployment insurance filing totaled 2.44 million. While this number is extremely unsettling based upon the prior six consecutive week’s numbers have been in decline, this according to the United States Labor Department statistics.

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Wishing you as always good trading and good health,

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.