Extreme dollar strength limits the price gains in gold today

NEW YORK (June 2)  A substantial move in the dollar nullified market participants from bidding the precious yellow metal substantially higher in trading today. As of 6:30 PM EDT gold futures basis, the most active August 2022 contract is fixed at $1849.70. The gains in gold today were largely muted by extreme dollar strength. The dollar gained 0.80%, or 81 points taking the dollar index to 102.58.

The significance of dollar strength can be best illustrated by viewing spot gold pricing through the eyes of the Kitco gold index, which separates the effect of dollar strength or weakness and market participants actively buying or selling gold. In the case of today, spot gold is currently fixed at $1846.70. This screen-print below is of the Kitco Gold Index taken at approximately 5 PM EDT. It has the current spot price of gold fixed at $1846.50, normal trading took gold pricing higher by $22.90 and dollar strength took away $13.80 of those gains resulting in today’s $9.10 price increase.

Both dollar strength and gains in gold pricing today were the byproducts of the market sentiment shifting its focus from inflation rather than raising rates today. It was this market sentiment that resulted in bidding the U.S. dollar higher and also being supportive of gold pricing. Typically, gold and the dollar move in an inverse direction rather than in tandem, as witnessed today.

KITCO