Dollar Dominance Mutes Gold Gains

October 21st, 2016 by

Gold prices have recovered from overnight losses to trade marginally above unchanged in New York. Bullion is battling headwinds from a stronger dollar, which is seeing big gains this morning against nearly every other major currency. The greenback touched an eight-month high in early morning trading.

Spot gold is looking to hang on today to log a weekly gain. Spot silver will have a harder time posting a positive week, as it fights against the dollar to stay in the green today.

oil glutOil prices are also being hamstrung by the stronger dollar, getting no help from recent Russian statements on their commitment to an international freeze on oil production levels. Watch for a reaction from the weekly rig count from Baker Hughes, if it comes in outside of expectations. The oil market is in a war between anticipation of an oil supply deal and the realities of a growing global oil glut and higher shale production in the US.

The euro is trading at the lowest level since March after taking a blow from the European Central Bank. The ECB promised to not abruptly end its quantitative easing program, reassuring markets shaken by rumors that the central bank was looking at ending bond purchases in the near future. The euro was trading below $1.09 in New York.

The British pound took another punch to the gut today, after UK Prime Minister Theresa May was met with a chilly and contentious reception from her counterparts at a summit meeting of European leaders. This is the third day of losses in a row for the pound, which is trading near $1.22. A year ago, one pound was worth $1.55.

In Asia, the Indian rupee continued its longest losing streak against the dollar since May, and the Chinese central bank set the trading range for the yuan to a six-year low.

Treasuries are higher today, looking to post the best week since mid-August. Yields, which move inversely to prices, have been dropping. This primarily applies to the longer-date Treasury notes, as demand for short-term Treasury bills eases ahead of an anticipated interest-rate hike by the Fed in December.

Stocks opened lower on Wall St, but are trending upward, with the Nasdaq being the first index this morning to trade in the green. The S&P 500 is facing a loss for the week if it cannot turn in a strong performance today.


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