Gold Jumps on Korean News, Dovish Fed

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Gold futures (@GC) are on pace for their best session in over a month. Most news outlets pinned the move on President Trump’s decision to cancel his summit with North Korea. But, another factor may be at play: the U.S. dollar.

Minutes released yesterday from the last Federal Reserve meeting were interpreted as dovish because policymakers were okay with inflation running above 2 percent for “a temporary period.” That, combined with the second straight bigger-than-expected increase in weekly jobless claims this morning, helped push the U.S. dollar index (@DY) down from its highest level since December.

A weaker greenback, as many traders know, can lift precious metals because they’re priced in dollars.

Some other bullish pressures may be taking shape for gold. First, commodities in general have rallied. Did you see the Thomson Reuters CoreCommodity CRB Index ($TRCCRBTR) near its highest levels in almost three years? Second, gold held its ground as the U.S. dollar surged in the last month. If traders wanted to sell it, that would have been the time. Third, silver outperformed gold over the same period and has been rebounding from long-term lows against the yellow metal. Both tend to rally when that happens.

Bottom line: Traders may want to keep an eye on precious metals as geopolitics remain jittery and the U.S. dollar shows signs of topping out.

Gold futures (@GC), showing 1-day changes
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.