A few golden ingots

Gold Retraces Modestly as Dollar Strength Dampens any Daily Gains

As of 4:45 PM EDT gold futures basis most active December 2021 contract is down two dollars, or -0.11% and is fixed at $1782.10. Concurrently spot or Forex gold is currently jumping between fractional losses and fractional gains. Currently spot gold is fixed at $1,782.55 approximately +0.05% or one dollar on the day.

gold oct 21

Considering that the dollar is currently up just over ¼% it is clear that any decline today can be directly attributed to a stronger dollar. Currently the dollar index is up 25 points, or +0.27%, and fixed at 93.785.

Looking at a daily candlestick chart we can see that gold is currently above its opening price. Gold opened trading at $1782.50 and traded to a high of $1790.40 and a low of $1776.80. That means when compared to yesterday’s trading range gold has had a higher high and a higher low, although it closed just below Wednesday’s closing price.

Gold did not have much competition from either U.S. stocks or cryptocurrencies. In the case of the cryptocurrencies, after hitting an all-time high yesterday Bitcoin futures declined by almost 6% ($3,980) and are fixed at $62,685.

After launching the first Bitcoin futures ETF yesterday, ProShares Bitcoin strategy (BITO) declined by 5.61% with the ETF currently priced at $40.64 per share.

U.S. equities were mixed with both the NASDAQ Composite and Standard & Poor’s yielding moderate gains today. The NASDAQ gained +0.62%, and after factoring in today’s gain of 94.0217 is currently fixed at 15,215.70. The Standard & Poor’s 500 gained 13.59 points, or +0.30%, and is currently fixed at 4549.78. The Dow Jones Industrial Average closed, in essence, unchanged with a decline of -0.02%, or a loss of 6.26 points, and is fixed at 35,603.08.

According to Reuters News, today’s fractional decline in gold prices was a result of choppy trading as the precious metal continues to be pressured by rising yields on U.S. bonds. However, gold prices were supported by reports about China that indicated that they are also experiencing upticks and inflation and an extremely troubled real estate(housing) market.

Reuters also spoke to Phillip Streible, Chief Market Strategist at Blue Line Futures in Chicago who said, “The Fed is going to taper and yields are going to make an all-time high so there is no reason for people to park their money in a nonyielding safety asset like gold.”

They also spoke about the double-edged sword that is inflation, Federal Reserve actions as inflation rises (a bullish component for gold prices) reduce stimulus coupled with higher interest rates which will reflect higher yields on U.S. government debt instruments will raise the opportunity cost of holding nonyielding bullion (a bearish component for gold prices).

It seems for the moment until the Federal Reserve convenes for its next FOMC meeting on November 2, gold will continue to trade in a range-bound manner reflecting the dynamic crosscurrents. Dollar strength and higher yields in U.S. debt will continue to pressure gold lower, and inflationary concerns will continue to be supportive of gold prices.

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Wishing you, as always, good trading and good health,

Gary Wagner