Gold Fights Against the Currents of the Dollar, Rising Yields, Equities, and Crypto

Recently it has been struggling successfully to stay above $1800 per ounce. On Monday as well as today, gold prices came close to testing the 100-day moving average, which is currently at $1792.10, and on both occasions closed just above $1800.

In the case of today’s intraday low of $1794.30 for gold futures, it was dollar strength in trading overseas last night that took prices to that low. However, the dollar closed lower in New York trading, which resulted in gold moving back above $1800. As of 5:30 PM EST gold futures basis, the most active August 2021 Comex contract is fixed at $1803.80, which is a net decline of $7.50. Concurrently the dollar index has come off of the highs of 93.19 achieved last night and is currently trading at 92.84, which is a net decline of -0.015%.

Yields on the 10-year Treasury Note gained 0.0710 or 5.87% and is currently fixed at 1.28%, creating another strong current that is curtailing any upside movement in gold.

There is also a case to be made that investment dollars today were flowing into U.S. equities markets. The S&P 500 gained 0.82%, the Dow gained 0.83%, and the NASDAQ composite gained 0.92% in trading today.

Cryptocurrencies also showed significant gains today, with Bitcoin Futures gaining 7.07% and Ethereum gaining 8.85%.

Investors always look to have their money in asset classes that will return the greatest results. With strong U.S. equities markets and the potential for cryptocurrencies to have found tentative support, it makes it more difficult for gold prices to rise.

Market participants await the FOMC conclusion meeting on July 28

The future direction of gold prices could certainly be influenced by the upcoming FOMC meeting, which begins on July 27 and concludes the following day when a statement is released, and Chairman Powell has a press conference. The statement, along with Chairman Powell’s press conference, will reveal any change in their current monetary policy.

Market participants are also waiting for any announcement by the European Central Bank on Thursday. According to an article by James Hyerczyk written in FX Empire said, “Gold futures are edging lower on Wednesday, pressured by a firmer U.S. Dollar ahead of the European Central Bank (ECB) announcements on Thursday, another rise in U.S. Treasury yields and increasing demand for riskier assets with U.S. equity markets hovering slightly below record highs. Despite having its gains capped, the market appears to be underpinned by some inflows into the safe-haven metal due to concerns over a surge in COVID-19 cases.”

The fact that gold remains above $1800 is bullish. Especially as we have seen the dollar move higher, yields in 10-year notes and U.S. equities markets both exhibiting gains.

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

Gary S. Wagner