The Daily Market Report: Gold Falls Below $1200 as Dollar Surges to 13-year Highs
23-Nov (USAGOLD) — Gold fell below support at 1206.00/1200.00, weighed by a surging dollar and yields. The breach of this level occurred in thin pre-holiday trading. Zerohedge reported that $6 bln in notional selling pressure hit the futures market.
The greenback jumped and bonds tumbled when U.S. durable goods orders were reported to have surged 4.8% in October. That was well above expectations of +1%. The gains were largely driven by transportation orders.
With the probability of a December rate hike already at 100%, speculation about multiple rate hikes is on the rise. The Fed is going to have to manage those expectations and they may not want to wait until the December FOMC meeting to provide some guidance.
The dollar index reached more than a 13-year high of 101.91. The last time the DX was trading at this level was March of 2003. At that time, gold was trading below $350! So, while the recent losses certainly smart, it is important to note the relative resiliency of gold.
Think about that though, the dollar on a trade weighted basis against our largest trading partners is at a 13-year high. There are going to be significant ramifications as a result.
Dollar strength is likely to squelch the long awaited return of inflation before it can even get a toehold. The impact on U.S. exports could tip our still tepid economy into recession. And we’ve talked considerably about our monstrous debt overhang recently and what a stronger dollar and higher rates mean for debt servicing.