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China’s manufacturing growth pressures the U.S. dollar taking gold higher

Commentaries & Views

A major component of dollar weakness today was a report out of China indicating that their manufacturing complex is in a period of robust growth. This is a major component of China’s economic reopening following its massive shutdown. Another factor resulting in bearish pressure on the dollar was euro strength. Collectively these fundamental events took the dollar 41 points lower or 0.39%, taking the dollar index to 104.415.

Tailwinds from dollar weakness were a major component in today’s gold price increase. However, it was a combination of a weak dollar along with traders actively buying that took the precious yellow metal higher. As of 3:51 PM EST gold futures basis the most active April contract is currently up $7.60 or 0.41% and fixed at $1844.30. Gold traded to a low of $1829.60 and a high of $1852.50 during today’s trading session.

According to Burton Schlichter, Vice President of global clearing and execution at StoneX Financial, “Despite the recent short covering and bargain hunting, large traders and some trend following programs are still short.” StoneX currently serves more than 32,000 commercial, institutional, and payments clients, and more than 330,000 active retail accounts across 180 countries.

According to the CME’s FedWatch tool, there is a 73.8% probability that the Fed will raise rates by 25 BPS and a 26.2% that the Fed will be more aggressive with a 50 BPS rate hike.

There are some Federal Reserve officials (who can be characterized as the more hawkish of the group) that are still recommending a 50 BPS rate hike this month when the FOMC meeting convenes (March 22-23). However, many analysts including myself believe that the Federal Reserve will stick to its current narrative which is slowing the pace of rate hikes which most likely will include three 25 BPS rate hikes at the next three FOMC meetings.

Lastly, it must be noted that critical reports will shape the final decision of the Federal Reserve at their next meeting which is the jobs report on March 10 and the CPI index for February on March 14. These two reports collectively will be the most current data that the Federal Reserve has to make its final decision.

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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.