Spot gold has extended to the downside, establishing another round of new 12-month lows. The yellow metal is lower for a fourth consecutive session. There has only been one higher close since the minor corrective high was established at 1265.89 on 09-Jul.


The metals came under more intense pressure on Tuesday following Fed chair Powell’s upbeat assessment of the economy before the Senate Banking Committee, which boosted rates and the dollar.  While Mr. Powell acknowledged the risks posed by a global trade war, markets largely ignored those concerns.


The chairman ducked trade policy questions from Senators on the premise that it was not the prevue of the central bank. "I'm going to try to walk the line . . . and not comment on any particular policy. But, in principle, open trading is good," Powell said.


The Atlanta Fed’s latest GDPNow reading seems to confirm Mr. Powell’s optimism, with a projection of 4.5% growth in Q2. The Blue Chip consensus has been steadily rising since May, approaching 4%.

 20180718 GDPNow


However, today’s reported plunge in June housing starts is just the latest indication that we may be in the late stages of this economic expansion. Housing starts tumbled 12.3% in June. It was the third consecutive monthly decline.


Mr. Powell is back on Capitol Hill this morning, testifying before the House Committee on Financial Services. His testimony today is likely to follow the same script as yesterday. However, this morning the chairman reportedly said that we need to get the economy growing faster than the debt.


Well isn’t that a novel concept . . .


Our $21.2 trillion national debt is a millstone around the neck of this economy. Rising debt-servicing costs — as a result of the Fed’s own tightening policy — are only making matters worse. Getting the economy growing at a sufficient clip to support such a massive debt load is no easy lift, especially so late in the expansion cycle.


He must mean he’d like to see growth of the debt slow. Good luck getting policymakers on Capitol Hill to sign-on to that.


Gold has traded as low as 1226.11, with scope seen for a challenge of the 1204.72 low from 10-Jul-17. Former support at 1236.45/1237.93 now offers resistance. The overseas high at 1229.19 provides a minor intervening barrier.


If gold ultimately negates the 1204.72 level and trades below 1200.00, we’d have to seriously consider a challenge of the 1122.61 low from December 2016. Additional minor support is noted at 1194.88


At this point however, the yellow metal is getting pretty oversold. I anticipate at least a minor corrective bounce ahead of the weekend, but such a move would likely be viewed as another selling opportunity.


Silver remains on the defensive after negating key support at 15.61 (12-Dec-17 low) yesterday. The next downside target is 15.17 (10-Jul-17 low), but potential based on the range breakout is as low as the 14.16 spike low from July of last year.


Silver has become quite oversold as well, favoring modest corrective activity. The overseas high corresponds with previous support at 15.61, marking initial resistance. Look for selling opportunities ahead of the 9-day MA (15.83), which has capped the upside in the previous 5-sessions. Short-term risk is above 15.99/16.04.


Here too however, an oversold situation has developed and silver has moved off the intraday lows. Upticks are likely to be viewed as selling opportunities ahead of the 9-day MA (15.90). More important resistance at 15.99/16.04 defines short-term risk.


Platinum traded as low as 803.50 before catching a bit of an intraday bid. Scope remains for a retest of the early-July low at 796.89. If this level were to give way, a challenge of the financial crisis low at 732.50 from October 2008 would have to be considered.


Palladium extended lower to move within striking distance of the 896.50 low from April. A breach of this level would favor further losses toward 838.00/836.03, a level marked by some minor lows from about a year ago. The overnight high at 916.44 now provides an intervening barrier ahead of previous support at 930.25.


In light of the broad-based commodities rout and dollar strength, focus remains on selling strategies for the precious metals. However, be aware that these markets tend to bottom in the summer, so we’ll be looking for signs of bottoming structures. Nothing on that front yet . . .


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