Hawaii Six O - Gary Wagner
Gold prices rebound after briefly sinking below $1700
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Yesterday we saw gold prices plunge, breaking the key psychological level of $1700 per ounce briefly, and then recovering slightly in New York to close at $1706. This was the third consecutive day that gold lost value as U.S. equities continued to trade in rally mode. Although gold had traded to its lowest low since May 27, when market forces took gold pricing to an intraday low of $1684, today’s $17 gain illustrates the underlying strength and more importantly resilience of gold as a safe haven asset.
Yesterday’s price drop was in response to the ADP jobs report which came in much better than expected by economists. While the forecast predicted that the ADP report would indicate a job loss in May of well over 8 million individuals, the actual numbers came in at 2.9 million people that had lost employment in May.
Today gold is trading sharply higher. As of 4:22 PM EST gold futures basis the most active August contract is currently trading up $17.40, and fixed at $1722.20. Today’s price increase is definitely aided by a falling U.S. dollar.
Dollar weakness has accounted for much of gold’s higher pricing on days the precious yellow metal closed higher, and also curtailed declines from being steeper on days that gold sold off since the middle of May. This can be genuinely be seen in today’s pricing for spot gold which is currently fixed at $1714, up $13.20 on the day. According to the KGX (Kitco Gold Index) dollar weakness contributed to $8.70 of today’s gain, with the remaining gain of $4.50 directly attributable to traders bidding gold pricing higher.
In fact, the U.S. dollar has lost value for the last eight consecutive trading days. After hitting an intraday high of 100 on Tuesday May 26, ( one day before Gold’s monthly recent low) the dollar index has been losing value. Today the dollar index traded off by -0.46%, which is a loss of 0.44 points and is currently fixed at 96.81. This is roughly a 3% decline in value in just over one week.
Gold has traded above the 50-day moving average since April 1st
The truth of the matter is since gold hit its highest value this year of $1788, it has been caught in a defined and fairly narrow trading range. At the same time gold pricing has been buoyant in that gold has effectively been able to hold pricing above a key short-term trend indicator, it’s 50-day moving average.
The last time gold has traded below $1600 per ounce, and the 50-day moving average was April 1. On that day gold prices actually move to a low of $1577 per ounce, as prices opened and closed below gold’s 50-day moving average. On April 1 gold’s 50-day moving average was just below $1600 per ounce at $1593. Since then the 50-day moving average has risen dramatically gaining approximately $100 and is currently fixed at $1706.90.
Although the volatility in gold pricing has dramatically increased, at least for the last two months we have seen pricing remains above the 50-day moving average. On a technical basis this is a key indicator that the vast majority of market technicians use to determine whether a stock or commodity is currently in a short-term bullish trend. Based on that factor it is safe to say that even after strong selloffs as we witnessed yesterday in gold, the bullish faction maintains dominance in regards to gold’s price.
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Wishing you as always, good trading,