Hawaii Six O - Gary Wagner
Considering dollar strength gold’s fractional gains were more than respectable
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
After factoring in two days of dramatic price declines in gold resulting in a loss of just under $90 per ounce, the fractional gains were significant. The significance is in the fact that gold (futures and spot) pricing advanced at all with such a strong dollar.
The dollar gained 0.71% and the dollar index is currently settled at 103.485. As of 5:48 PM EST, gold futures basis the most active April contract is currently fixed at $1880.20 after factoring in today’s gain of $3.60. Spot gold according to the Kitco gold index (KGX) is currently fixed at $1867.40, a net gain of $3.10.
The best way to illustrate how today’s fractional gains were significant is to look at the effect of dollar strength and normal trading in spot pricing. Physical gold gained $3.10 in trading today and that does not tell the complete story.
Dollar strength caused gold to decline by $11.75. Normal trading without factoring in dollar strength or weakness actually took gold $14.85 higher. This is why a fractional gain of three dollars does not fully disclose the significance of gold’s upside move today.
Silver did have a slight decline losing $0.14 to dollar strength, losing nine cents due to normal trading and five cents due to dollar strength with spot silver currently fixed at $22.25.
Because today’s price advance in gold was accomplished in light of major headwinds the result of dollar strength we can say that gold effectively rebounded today even though it’s not evident by just looking at the price change. However, the gains in gold regardless of dollar strength could have been due to simply short covering with traders pulling profits on short-term trades rather than the initial accumulation of long positions. In other words, it is too early to tell if gold prices witnessed the first signs of prices pivoting back into a bullish demeanor.
Gold has gained so much value since November 3 that the two-day price decline of $90 last week was long overdue. The question of whether or not it has found a bottom and this correction concluded at a 38.2% Fibonacci retracement level, or has more downside potential will be revealed over time. The fact that we didn’t see a sharp decline today was welcome news for gold bulls and time will tell whether or not the current price correction has concluded or not.
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Wishing you as always good trading,
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