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Gold was down today, falling short against a stronger dollar.
For the most part, gold was underpinned by worries about the stand off between Russia and the west over Ukraine as well as unrest in the Middle East; however, any assistance those factors might have given the metal was offset by a stronger dollar and weak physical demand from China.
As Reuters reported, in early morning trade, “gold’s losses snowballed, with more than 10,000 lots — or one-third of the volume at the time — changing hands after the yellow metal fell below key technical support at $1,275 an ounce and the Aug. 21 low at $1,273.06.”
The yellow metal continued on its downward spiral throughout the morning as the dollar climbed to its highest since January against a basket of 10 currencies. Pushing the dollar up was data showing that US manufacturing in August grew at its fastest pace in three years, which renewed hopes for the economy.
“Good economic data and concern about the U.S. raising rates is keeping gold under pressure,” Tommy Capalbo, a broker at Newedge Group, told Bloomberg, adding that the positive data has indeed overshadowed any political concerns.
Commenting on gold’s descent, Ross Norman, CEO of Sharps Pixley, stated “[i]t’s when the dollar hits big numbers that gold gets punished and this is clearly one of those moments.”
By way of explaining investors’ behavior, Norman said that “[t]here is a lot to be concerned about on the political and economic front (but) people tend to get inured to the idea of bad news and it doesn’t affect them anymore.”
As GoldSeek highlights, “[t]he vast majority of investors have no idea just how dangerous the worsening situation with Russia really is,” adding that the West is looking for trouble — that it will likely get — with Russia.
So with political tension seeming to take a back seat to a rising dollar, the publication notes that should tension continue to escalate, there could be a “meteoric rise in Precious Metal prices �— and it could start with a big move that seems to come out of nowhere.”
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.
