Spot gold starts the week with a more than $10 gain, helped by a weaker dollar. While the intensifying trade war continues to dominate headlines, the disappointing wage growth reported on Friday is weighing on U.S. yields and the greenback.


The South China Morning Post reported on Friday that “a trade war between the world’s two largest economies is on.” After the U.S. imposed $34 bln in tariffs on Chinese exports, China retaliated in kind. Now the Trump administration is threatening to retaliate on the retaliation with an additional $400 bln in tariffs.


Yes indeed, that’s a trade war my friends. While China may be the other big dog in this fight, the EU, Canada, Mexico and Russia are fully engaged in the trade war as well. However, a host of other nations are feeling the pinch due to ripples through global supply chains.


The headline jobs numbers on Friday were solid and even though the unemployment rate rebounded to 4.0%, it was due to an increase in the labor force, which is good news as well. However, persistently slow wage growth has trimmed prospects for a fourth rate hike in December.


Both U.S. yields and the dollar have fallen further today. The dollar index has satisfied the 93.86 (50-day MA) objective. As noted last week, a measuring objective off the confirmed double-top formation suggests potential for a challenge of solid chart support at 93.21/19 (07-Jun and 14-Jun lows).


20180709 DX Chart


Further weakness in the dollar should continue to provide a tailwind for gold. The yellow metal has exceeded initial resistance marked by last week’s high at 1261.11 and the secondary level at 1267.30/68/98 (20-day MA, 26-Jun high, 23.6% retrace).


20180709 Gold Chart


A short-term close above this level would suggest potential for a 38.2% retracement of the decline off the April high. That Fibonacci target comes in at 1286.98, but at that point we’d have to be considering a move back above the pivotal 1300.00 level and another run at the 200-day MA (1303.09 today).


Silver is looking brighter today, having moved convincingly back above $16. Gold’s improving technical picture is definitely helping silver, which managed to close just above the 9-day MA on Friday. With minor chart resistance at 16.16 out of the way, scope is now seen for a challenge of the 16.36 Fibonacci level (38.2% retracement of the decline off the June high).


We’ll call $16 initial support. A move back below this level would be disappointing, leaving silver in a more neutral posture. Continue to watch gold for cues.


The weaker dollar is helping the PGMs as well. Platinum has regained some upside momentum, exceeding resistance at 847.16. The convincing move above the 9-day MA bodes well for additional corrective gains toward the 20-day MA at 863.82. However, after setting 10-year lows just last week, the trend remains unquestionably bearish at this point.


Palladium has staged an upside breakout of the symmetrical triangle formation, contrary to my expectations. The breach of the high end of the recent range and the probe above the 20-day MA (966.09 today) favors a return to the 977.06 midpoint of the 896.50/1057.62 range that has dominated since April.



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