Gold is under pressure again today to kick off the new trading week. As of this post, the yellow metal is down $6.80 per ounce at $1202.60. The U.S. Government is closed today in observance of the Veteran’s Day Holiday, and while stocks are open the bond market is closed. Price action could potentially see some increasing volatility today due to lighter trading volumes.
A Stronger Dollar
The U.S. dollar index is stronger today and currently trading around a 16-month high. Accelerating inflation data and the notion of continued rate increases are likely fueling upside in the greenback. The dollar has been a major obstacle to higher gold in recent months, and a fresh leg higher could potentially put renewed pressure on gold and dollar-denominated assets. A stronger greenback can also have a negative effect on stock prices, as is being seen today, as it makes sales for multinational companies more challenging.
Slumping Crude Oil
The gold market has also been paying close attention to the recent slide in crude oil prices. Last week, oil officially entered bear market territory as prices hit a 10-day losing streak. The string of declines was the longest for the market since 1984. The declines seen in crude oil could potentially be representative of the damage being done by the U.S./China trade war at a time when the Chinese economy is already a cause for concern. Like copper, the oil market is often seen as a barometer of overall global economic activity, and with both copper and oil seeing significant pressure in recent weeks concerns over the health of the global economy are on the rise.
A Technical View
Following recent gains in the yellow metal, the market saw a period of sideways price action before once again coming under pressure. The current dip could be a key test for gold, with buyers possibly stepping in at the $1200 level. If the market is not able to hold the $1200 area, the next step could be a move back towards the recent swing lows in the $1181-$1183 region. A break below this support level could set the stage for a fresh, significant leg lower.
Gold Price Chart
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