Spot gold is back under pressure to start this holiday-shortened week. U.S. markets close early tomorrow and will be closed on Wednesday, 04-Jul in observance of Independence Day.
The yellow metal has retraced most of Friday’s corrective bounce to move back within striking distance of the 6-month low that was set last week at 1245.84. The dollar has recouped most of its corrective losses from Friday, which is pressuring gold.
The greenback remains underpinned by heightened trade tensions and a belief that the U.S. economy is going to be hurt the least if those tensions develop into a full-blown trade war. The U.S. is scheduled to impose $34 bln in tariffs on China at the end of the week. China is fully expected to retaliate.
The dollar index remains confined to Friday’s range thus far, but today’s rebound leaves the confirmation point of the double top at 95.53 (21-Jun and 28-Jun highs), well protected. Friday’s low at 94.47 now provides a good intervening barrier ahead of the more important 94.17 low from 26-Jun.
A breach of the latter is needed to confirm the double top and shift focus to the 93.21/19 lows from June. Such a move would likely provide some relief for the precious metals market, but today’s rebound in the dollar leaves this scenario on the backburner for now.
A more serious test of the 1245.84/1244.40/1236.41/1231.98 support zone is anticipated. This formidable downside barrier is defined by last week’s low, 50% retrace 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.
A push through this area is likely to prove difficult initially, but if it were to give way, focus would shift to the next Fibonacci level at 1215.70 and the 1204.76 low from last July.
A rebound above the 20-day moving average (1277.21 today) is needed to ease short term pressure on the downside. Above that, the more important 1300.00/1303.29 level would be back in play.
Silver was unable to sustain gains back above $16. With resistance at 16.48/50 well protected, scope remains for a challenge of the 15.61 low from 12-Dec-17. Last week’s low at 15.82 provides intervening support.
Platinum is back under pressure after Friday’s brief respite, establishing new 2½-year lows. The trend low from January 2016 at 810.30 seems to be the attraction.
Palladium has retreated into the range as well. An inside day is apparent at this point, but Friday’s low at 929.32 is vulnerable to a retest. A breach of this level would lend credence to the bearish scenario that shows potential to the 889.44 low from 09-Apr.
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