Gold traded higher on Friday but ended the week modestly lower. Given the risk-on sentiment this week – evidenced by the strength in the stock market – the yellow metal was pretty darn resilient.
The signing of the Phase One trade deal between the U.S. and China seemed to be the driving force behind risk appetite, despite its limited scope. Better than expected Chinese economic data further bolstered global sentiment and soft U.S. inflation fostered a belief that the Fed won't be hiking rates any time soon.
The market readily dismissed this week's movement on the impeachment front. Whether witnesses are called in the Senate or not, it is widely believed that President Trump will be acquitted and remain in office.
In the wake of gold's big sell-off on January 8th, which resulted in a key reversal, the downside follow-through this week was pretty limited. While the yellow metal remains below the 9-day SMA, the 20-day (1536.40) was left unmolested.
Spot Gold Daily Chart
Gold may still dip to test the 20-day, but I think the underlying trend remains favorable. I'd feel better about that assertion with a rebound above 1573.67 (50% retrace of the recent decline). At that point, I'd be looking for a retest of the recently established near-7-year high at 1611.41.
On the other hand, a close below that 20-day SMA would leave gold vulnerable back to the 1500 zone, where I think the buyers will reemerge.
The silver trading pattern was very similar. The white metal closed right at the $18 level, holding above the 20-day SMA on a close basis. The halfway back point of the recent decline comes in at 18.27, which is now protected by Friday's high at 18.17.
Spot Silver Daily Chart
On the downside, a short-term close below the 20-day SMA (17.93 on Friday) would favor a retest of the 17.68 low from Tuesday. Below that, the 100-day SMA at 17.59 would be the likely attraction.
The stars of the week, however, were unquestionably the PGMs: Platinum posted a 4.6% weekly gain and closed above the $1,000 level for the first time in nearly 3-years. Palladium notched a 17.1% weekly gain and set a new record high somewhere north of 2500.
Spot Platinum Daily Chart
Reuters puts the new high at $2,537.06, but I'm not sure anyone really knows where this market is anymore. We've seen spreads blow out to as much as $200 wide and dealers take down their quotes. We heard talk today that at least two major liquidity providers have walked away from the palladium market, which has a distinct ripple effect throughout the market.
Spot Palladium Daily Chart
Ultimately, the underlying fundamentals for palladium remain supportive. The market remains in deficit on the supply side and demand remains robust from auto manufacturers, particularly those in China. Arguably a correction is overdue after 20 consecutive higher closes, but I think any such move will be viewed as a buying opportunity.
Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Financial Services LLC, unless otherwise expressly noted.
