Sometimes it’s not so much new news that moves the market as it is a tipping point where the market decides to pay attention to what it has known all along.
Today gold dropped to a three-month low to close at $1253 an ounce. That drop brings the 200-day moving average and the gap from mid-June into play. Those levels are likely to provide support for a while–until they turn into resistance if the continued strength of the dollar pushes gold and silver prices lower.
The U.S. Dollar Index rose by 0.53% today as the dollar rallied against all the world’s major currencies. The index closed at 96.63 today, which is near the middle of the range of 92 to 100.50 that the index has traced out since January 2015. If the dollar index looks like it is threatening the top of that range, then the financial market could see a bigger move as traders decide they need to reposition their currency portfolios ahead of a potential break out through the top of the range.
The drop in gold over the last few sessions runs parallel to the rise in the dollar and to a growing conviction that the U.S. economy is strong enough to support an interest rate increase from the Federal Reserve on December 14.
That belief will get a test tomorrow when the government reports September jobs numbers. Anything above the 175,000 or so net new jobs expected by economists will continue–and perhaps accelerate–recent trends toward the dollar and away from gold and Treasuries.