Spot gold has turned mildly corrective, buoyed by a pullback in the dollar and some profit taking. However, upticks have been limited thus far and the yellow metal is poised to close lower on the week (-1.46%), lower on the month (-3.67%) and lower on the quarter (-5.63).
While we’re at it, gold is also down 4.00% for H1 (YTD). The yellow metal is trading well below the 20-, 50-, 100- and 200-day moving averages, which have all rotated lower. The June losses also resulted in a violation of trendline support drawn off the 1046.18 low from December 2015 (see monthly chart below).
It’s worth noting on this chart the generally lackluster nature of gains since that 1046.18 low was established. The initial rebound stalled at 1375.17, shy of the 38.2% retracement level of the decline off the all-time high. This year’s run at the upside only got as high as 1365.98.
Admittedly, that all may sound pretty grim, but all is not lost . . .
Gold has dropped $120.14 from the high for the year at 1365.98 (25-Jan) to the low for the year at 1245.84 (28-Jun). That’s a decline of 8.8%, so we’re still a long way from flipping back to a bear trend.
The support level we’ve been watching at 1244.40/1236.41/1233.76 was pressured on Thursday, but remains intact. This formidable downside barrier marks 50% retracement of the rally from 1122.82 (12-Dec-16 low) to 1365.98 (25-Jan high), the chart low from 12-Dec-17 and the 200-week moving average respectively.
Assuming gold closes higher today, it would be only the second positive close out of the last 11-sessions. As we noted in yesterday’s commentary, the market had become quite oversold and was due for a rebound. Some profit taking was anticipated ahead of the weekend, particularly in light of next week’s U.S. holiday.
A sustained move above the 200-day moving average (1303.61 today) is still needed to return focus to the anemic underlying uptrend. A short-term close above the 20-day moving average (1279.49 today) would encourage a retest of the 1300.00 zone, but for now focus remains on selling strategies.
Keep an eye on the potential double-top in the dollar index as a potential source of a bid in gold. Yesterday’s breach of the previous high at 95.53 was less than convincing and the DX is under renewed pressure today.
Silver is trading back above the $16 level after falling to new lows for the year earlier in the week. Here too, some profit taking ahead of the weekend and the holiday week ahead was not unexpected. However, as long as resistance at 16.48/50 is intact, scope remains for a short-term challenge 15.61 (12-Dec-17 low).
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 Group LLC, unless otherwise expressly noted.
