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A strong dollar is putting pressure on gold prices

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Mar. 5 2015, Updated 2:19 p.m. ET

Gold price action

The April gold futures contracts settled at $1,200.90 per ounce on Wednesday. Gold prices tested the lows on February 18 and 20. This is the sixth down day in the last ten days. The average down days have been 0.17% less than the up days over the same period.

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Gold futures settled just above $1,200 per ounce

On March 4, 2015, the April gold futures settled near the day’s low—down by 0.29%. The total volume for the day was 99,539 contracts. The volume decreased by 56,116 contracts from the previous trading session. Gold prices are in a deep downward trend from the highs of August 2011. The massive decline in gold prices was led by the appreciating dollar and strengthening US economy. This led to a lower demand for gold.

In February 2015, gold prices declined due to a strong dollar and improving US economy—as stated above. These factors are still driving gold prices lower on March 4, 2015. The consensus of strong jobs data means that the improving US economy and a strong dollar will continue to put pressure on gold prices. As a result, investors are reducing their positions in gold and its ETFs. This is driving gold prices lower.

The decline in gold prices impacts the margins of gold ETFs—like the iShares Gold Trust (IAU) and the VanEck Vectors Gold Miners ETF (GDX). It also impacts gold stocks—like Kinross Gold Corporation (KGC), Newmont Mining (NEM), and Barrick Gold (ABX). Newmont Mining and Barrick Gold stocks make up 6.83% and 8.10% of GDX, respectively.

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