Stronger U.S. Dollar Pushes Comex Gold Near Lows From Start Of Year
San Francisco (Sept 19) Gold futures have now given up most of their gains for the year as the metal was pressured again Friday by a muscular U.S. dollar.
After the pit close on the Comex division of the New York Mercantile Exchange, gold for December delivery lost $10.30 to $1,216.60 an ounce. The market hit a low of $1,214.20 that was its weakest level since Jan. 2 and within striking distance of the ending 2013 price of $1,205.70.
December silver fell 67.3 cents to $17.844 an ounce, with a session low of $17.78. On a futures continuation chart, silver had not been below $18 an ounce since August 2010.
The London afternoon gold fixing was $1,219.75, down from the morning fixing of $1,222.50 and the Thursday afternoon price of $1,220.50.
“It’s because of nothing more than a higher dollar here,” said Sean Lusk, director of commercial hedging with Walsh Trading.
Shortly after the Comex pit close, the euro was down to $1.28434 from $1.29150 late Thursday. The greenback has been stronger since a mid-week meeting of the Federal Open Market Committee, in which policy-makers said they would keep interest rates low for a “considerable time,” but their collective forecasts suggested that whenever they do hike the federal funds rate, they could do so more quickly than what was reflected in the last forecasts in June.
“With a strong dollar like this, gold is really having a hard time keeping its head above water,” said Kevin Grady, president of Phoenix Futures and Options on the Comex floor.
Lusk added that gold also isn’t getting any help from softer crude oil and “unrelenting” strength in U.S. equities. The Dow Jones Industrial Average and S&P 500 were slightly on either side of unchanged as gold closed, but had both hit record highs on Thursday. For some time, analysts have said some investors have shifted from commodities such as precious metals into high-flying stocks.
Several traders cited a weak technical picture for gold on the charts, with the metal well below all of the major moving averages. The market lately has fallen through important chart support around the $1,240 and broken through a trendline, Lusk said. He also pointed out that gold has now put in a series of lower lows and lower highs on a daily price chart.
“You’ll maybe have possible support around $1,200,” Lusk said. “But really, that is not of technical significance. It is getting near oversold. I will say that.”
Grady commented that with the large number of traders holding short, or bearish, futures positions, there is potential for the yellow metal to get a short-covering bounce.
Otherwise, Grady and Lusk characterized the physical demand that has emerged on the pullback as still light. Likewise, gold has not gotten a safe-haven bid lately, as it did earlier in the year due to geopolitical tensions surrounding Ukraine-Russia and the Middle East, Lusk added.
“Every time we do hit a low, we do get some fresh spec buying – people trying to pick bottoms — and a little bit of profit-taking (by shorts) as well,” Lusk added. “But boy, there wasn’t even much of that today.”
Should gold fall through the psychological $1,200 level, the area around $1,180 will be a key chart support level, several traders commented. This is where gold put in a double-bottom in 2013, based on a futures continuation chart.