Gold Hits A Fresh Record—Then Gets Rocked By A Dollar-Driven Selloff
Sell-Off from $5500
Whatever the primary driver, reaching to-and-through $5500/oz appears to have been a pivot point for gold traders. London-based trading early Thursday morning indicated there was not a deep enough pool of new buyers at this level, and bids slipped back below $5490.
This is where a lot of speculation-interest dried up, and as New York traders logged on for the day, gold was slammed by a rush of profit-taking liquidations, and the precious metal's spot price dipped to $5260/oz.
After a moderate rebound late in the US trading day, Asian and European desks, likely spooked by the New York drop, began to sell aggressively and pushed gold prices all the way back down to $5000.
Support held around the same line through even the opening of US markets on Friday morning, before another surge in the US Dollar pushed too strong a headwind against gold. Across Friday's trading in New York, we have seen prices fall as far as $4740/oz.
Despite an afternoon rally back to roughly $4900, gold does not appear to have the open interest or momentum to regain $5000.
The Next Fed Chair?
Also, applying pressure against gold, largely as it has pushed the Dollar higher, has been a long-awaited announcement of the White House's nomination to replace Jerome Powell as head of the Federal Reserve when his term ends in May. Former Fed Governor Kevin Warsh has been tapped for the role.
This was, of the likely candidates on offer, certainly the pick least likely to worry financial markets, particularly as Warsh himself has argued for the importance of the Fed's independence from the executive branch. The Dollar has run higher on Thursday and Friday at the same time as risk-appetite has ticked higher.
What We’re Watching Next Week
While the question of what news will hit over the weekend with markets closed is always a critical unknown these days, next week we will watch to see just how far from $5000 investors might be able to let gold fall.
While we have a bit longer to wait for new inflation data that has regained some importance with regard to projecting Fed policy and interest rates, next week will wrap with the January Jobs Report, likely another big test for the yellow metal.
There will also be the question, much earlier in the week, of whether an expected "temporary and partial" government shutdown over the weekend will spill over into the week as legislators haggle over extending government funding through the end of September.
In the meantime, traders, I hope you can get out and safely enjoy your weekend for the next couple of days. After that, I'll see you back here next week for another market recap.
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