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Gold pricing closes solidly higher, breaking above its trading range

Commentaries & Views

Gold futures had solid gains today closing above the highest close in 2020. On April 14 of this year gold hit an apex as it reached the highest intraday high for the year when it traded to $1788, and backed off on the close. On that day not only did gold pricing reach the highest intraday price, it also closed at the highest level this year, closing at $1769 per ounce.

Today gold closed near its high of $1786.10. As of 4:15 PM EST gold futures basis the most active August contract is trading up by $18.20 (+1.03%) and is currently fixed at $1784.60. today’s trading range took pricing just $1.90 from this year’s high of $1788.

Noteworthy is the fact that today substantial gains were almost an equal combination of buyers entering the market and U.S. dollar weakness. This can be clearly illustrated when looking at the KGX (Kitco gold index) which indicates that spot gold gained $13.80 as of 3:44 PM EST. The $13.80 gain is a combination of dollar weakness which contributed $6.50, and buying which added $7.30 in value.

U.S. Dollar continues its decline

On March 9 the dollar index traded to a low of 94.60, and then climbed to an intraday high of 104. As the epidemic grew into a pandemic by the middle of March, we saw the first signs of dollar weakness. The index fell from 1042 to 95.72 on June 10. Recently we have seen the index have higher closes for six of the seven following trading days. On Friday the market hit a high of 97.70. On Monday the index reached a high equaling Friday’s high forming a double top. Today’s close in the dollar index was in the middle of today’s trading range. Today’s candle on a daily dollar chart confirms a pattern that formed on Friday and Monday labeled as an engulfing bearish.

Multiple factors continue to be highly supportive of higher gold pricing

Today gold closed at its highest value since 2012. Dollar weakness was only one factor contributing to today’s historical climb. Renewed tensions between the United States and China were once again in the spotlight. There were a series of conflicting statements by Peter Navarro regarding the status of the trade deal between the U.S. and China.

North Korea’s recent actions against South Korea seems to have been put on a back burner but could heat up at any moment. Then there is the increased tension between China and India over disputed territory on the border.

Most importantly the U.S. Treasury Department has funded in a package of over $3 trillion. This in conjunction with a highly accommodative monetary policy by the Federal Reserve keeping interest rates near zero and adding an additional $3 trillion to their balance sheet as they have been purchasing treasuries, mortgage-backed securities, and now corporate bonds. Any one of the situations could have a bullish impact on gold pricing, however the combination of all of the factors mentioned above provide a profound bullish tailwind taking gold pricing to $1800 per ounce, and possibly even challenging the all-time record high just above $1900.

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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.