Gold Surges, Dollar Declines On Fed Official’s Remark & Geopolitical Unrest

Gold and the US Dollar Today

After opening at $2035.10 in trading today gold futures surged to a high not seen for approximately the last year. As of 3:15 PM EST, the most active February 2024 contract has surged by $26.30 and is currently fixed at $2061.50.

A major component of today’s strong upside move in gold was the continued decline of the dollar. The dollar has traded to a lower high, a lower low, and a lower close for the last three consecutive trading days. Currently, the dollar is down 0.44% and the index is fixed at 102.65. Considering that the dollar index was trading above 106 on November 1, the decline in value amounts to approximately 4%. The dollar index is weighted against a basket of six foreign currencies with the euro accounting for over half of the index’s weight.

Christopher Waller’s Hawkish Stance: Impact on the Dollar Index and Fed Policy

The U.S. dollar index was created in 1973 as a method to track the value of the U.S. dollar against other major currencies including the Euro (58%), the Japanese yen (14%), the British pound (12%), the Canadian dollar (95), the Swedish krona (4%), and the Swiss franc (4%).

A single statement by one of the more hawkish voting members of the Fed might have been the impetus to continue the dollar’s decline. Christopher Waller, a voting member of the Federal Reserve who has been a board Governor since 2020.

Today he told the American Enterprise Institute think tank that he believes that “inflation rates are moving along pretty much like I thought”. He added, “I am increasingly confident that policy is currently well-positioned to slow the economy and get inflation back to 2%”. Most importantly he suggested that the Fed could start lowering rates if inflation continues to decline “for several months”, adding that, “There is no reason to say we will keep it really high.”

While he is only one of many voting members the fact that he is considered one of the more hawkish members carries a lot of weight when it comes to signaling that the Federal Reserve has concluded its rate hikes and is now considering rate cuts if certain variables come into fruition.

Gold Price Forecast

Considering that the world is facing violent conflicts in the Middle East and Ukraine, combined with Waller’s words these facts have taken gold well past the elusive and key psychological level of $2000 per ounce. In fact, on a technical basis, there is minor support at today’s high of $2065 based upon a former support level or price bottom that occurred at the end of April. If this resistance is taken out the next levels we would look at are $2080 and $2100.

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Wishing you as always good trading,

Gary S. Wagner