Gold Prices Facing Pressure from a Strong US Dollar

To start the week off, gold prices slipped on Monday, ending its three month highs in previous sessions after mounting pressure from a strong US dollar and a return to risk taking assets in the aftermath of the recent global market sell off.

The spot price for gold was down 0.54% to US$1,226.62 per ounce. While US Gold Futures finished at US$1,227.60, sliding a moderate 0.7%.

Despite all the excitement around gold, and the volatility of the global markets that we are currently seeing, gold prices have settle somewhat. Find out why our resource expert thinks it might be a good idea to hold off on buying gold. Click here.

What does equity volatility mean for gold prices?

Senior market strategist at RJO Futures, Bob Haberkorn claimed it would be difficult to see gold rally after the renewed strength in the dollar, which could mean for a bit of a correcting period.

Despite the volatility we have seen in equities (on Monday) if gold is still down so much, it shows you that the flight to safety is not going into gold but the dollar because of the outlook for higher rates.

This comes amid forecasts that higher US interest rates could impact dollar-priced gold, raising the opportunity cost of holding it. As you might expect following a jerky Europe performance, Monday saw gains to the US stock market after sessions closed in global equity markets. Which invited investors to look for safer assets, lifting gold to US$1,243.32, its highest since 17 July on Friday.

The dollar also edged higher against the euro after German Chancellor Angela Merkel said she would not seek re-election as head of her CDU party.

Gold is now increasingly in need of supporting fundamentals to carry it higher. This after the tailwind from short covering begins to fade given the sharp reduction witnessed during the past few weeks,’ said Saxo Bank analyst, Ole Hansen.

Banks cut gold forecasts

Hedge funds and money managers have cut their net short positions in gold to the smallest since mid-July, data shows. A well as this, banks and brokerages have slashed their average gold price forecasts for this year and 2019 according to Reuters.

Keep in mind that data from a Reuter’s poll shows that near-term prices are expected to recover. When this recovery will happen is not so easy to pin down, so stay tuned.

Regards,

 

Ryan Clarkson-Ledward,
For 
Money Morning

PS: If you’re thinking now is the time to jump back into gold investments, you might want to hold off. Our resources expert Jason Stevenson is a bit bearish on this front, and he believes that gold prices still might tank before we see any signs of improvement. Read more in his free report: ‘Why You Should Wait to Buy Gold Stocks’.


Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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