balance of gold and dollar

Gold Gains on Dollar Weakness

November 28th, 2016 by

Gold prices are seeing modest support from a softer dollar this morning, reversing recent losses and holding barely back above the $1,190-per-ounce threshold on Monday morning. The yellow metal was trading just 0.2% higher at 10 am EST in New York. Platinum surged about $20 above unchanged to $930 an ounce while the palladium price spiked 2% to $750 an ounce.

balance of gold and dollar

Spot silver, meanwhile, added better than 1.4% to move above $16.60/oz. This is a natural bounceback considering technical charts have shown that silver is now more than 20% below its annual high and has seen a so-called “Death Cross” formation, the 50-day moving average (50-DMA) falling below the trend of the 200-DMA line, both signs of the presence of a bear market.

Dollar Dip

Besides a focus on how OPEC’s big decision about production cuts will affect the crude oil market, the major factor moving the markets on Monday was an overnight drop for the U.S. dollar. Profit-taking in the late hours of trading in Asia helped boost gold and U.S. Treasurys. There was plenty of short-covering and bargain-hunting in the precious metals as the dollar touched as low as 100.6 on the DXY index before jumping back to 101.5 when exchanges in New York opened. The greenback is only 1% off of its 52-week high, however.

As a result of the dip for the dollar, Treasurys continue to plow ahead. The yield on 10-year T-note is around 2.33%, similarly below its 52-week high but still an impressive 100 basis points above its lowest levels in 2016. The 10-year Treasury just capped its biggest-ever three-week gain.

Considering where gold has continued to hover despite a significant rally for the dollar lately, precious metal investors should be encouraged about how the metals could perform going forward if the USD corrects lower at any point, whether from possible moves in the energy markets or the incoming Trump administration’s pending infrastructure spending plans.

Some institutional funds have been betting on crude oil price volatility as OPEC mulls a potential agreement to cut production, but it appears that Saudi Arabia and its partners have already backed down on whether or not any cut will take place.

Outside Markets

Moreover, Venezuela—who is the only other OPEC member nation located entirely in the Western Hemisphere with Ecuador—is seeing its economic crisis worsen as the cash-strapped country seems to teeter on the brink of mass starvation and unrest. Staggering 720% inflation in Venezeuala year-to-date has made many cash bills virtually useless. Elsewhere, Greece and India are experiencing dire problems with the availability of banknotes. The international currency crisis could spread further if a December referendum in Italy goes against the wishes of Prime Minister Matteo Renzi’s party.

News to pay attention to in the U.S. will be nonfarm payrolls released on Friday. Reports of consumer spending numbers during the Cyber Monday and broader Black Friday sales will also be closely watched, as a fair amount of economic bets are always placed on retail performance during this time of year.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.