US dollar

Tracked by the Federal Reserve, the weekly US Dollar Index (UUP) measures the value of the dollar compared to its six significant trading partners—the euro, Japanese yen, the British pound, the Canadian dollar, the Swiss franc, and the Swedish krona. A rising value means that the dollar is stronger compared to other currencies and vice versa.

Why the Strong US Dollar Outlook Means Pressure for Gold Prices

Relative economic strength

The US dollar (UUP) is back on its ascent with an upward bias. While US economy has yet to enter a phase of full strength, it’s still doing better than its major trading partners. The relative economic strength should help propel USD higher.

Diverging monetary policies

The Bank of Japan (or BOJ) kept its policy unchanged despite soft inflation data. Japan’s GDP contracted by 0.2% quarter-over-quarter in 3Q15 after a similar contraction in 2Q15. However, the October policy minutes indicated that the BOJ might take additional easing measures if concerns over growth and prices remain.

The minutes of the European Central Bank’s (or ECB) October meeting suggested more easing could be on its way. It could consider cutting one of its benchmark rates and enhancing its existing quantitative easing.

The current global environment remains favorable to the US dollar. As the monetary policies of the world’s main economies—including Japan, the ECB, and China—remain accommodating, the Fed’s stance of tightening could lead to further strengthening of the USD.

Weak commodity prices are also stoking the USD’s appreciation against the currencies of emerging market (EEM) countries.

US dollar and gold

Dollar-denominated assets, including gold, are influenced by the dollar’s strength. A strong US dollar is negative for gold and vice versa. The current strength in the US dollar is also pressuring gold prices.

As a result, it’s important to track the dollar’s direction. This can point you towards the direction of gold prices (GLD) and gold stock prices like AngloGold Ashanti (AU), Gold Fields (GFI), and Agnico Eagle Mines (AEM). The US dollar also influences funds like the VanEck Vectors Gold Miners ETF (GDX). Together, these three companies contribute 11.90% to GDX’s holdings.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

14 Jun

Why Kimberly-Clark Stock May Stop Rising


Kimberly-Clark (KMB) stock has risen 20.5% this year, boosted by the company’s better-than-expected sales and earnings during its last reported quarter. However, its stock could stop climbing. Here's why.