Spot gold has rebounded in early New York trade after President Trump once again went on the attack against Fed rate hikes and the strong dollar. Nonetheless, the yellow metal seems poised to close lower on the week.
Mr. Trump lambasted the Fed yesterday in a CNBC interview yesterday for raising rates and pushing the dollar higher. He reiterated that sentiment in a series of tweets this morning, saying, “Tightening now hurts all that we have done.”
The President seems to have a friend in St. Louis Fed President James Bullard, at least with regard to monetary policy. Bullard favors pausing rate hikes to avert yield curve inversion. An inverted yield curve is a bearish signal for the economy and Bullard warned that such a condition could happen before the end of the year.
Mr. Bullard however did dismiss the notion that the President’s comments will influence policy. “The [FOMC] has a mandate to keep inflation low and stable and obtain maximum employment for the U.S. economy, so people can comment, including the president and other politicians, but it’s up to the committee to try to take the best action we can to achieve those objectives,” said Bullard.
I too am doubtful that the President will be able to jawbone rate hike expectations and the dollar lower. Nonetheless, the dollar index is back below the 9- and 20-day moving averages, even after blowing-up the double-top formation and the potential head-and-shoulders top yesterday.
This morning’s Zaner Metals Newsletter from the futures side of the house suggests that yesterday’s price action in the dollar “hints at a temporary blow off top.” A close below the 20-day MA today would lend credence to that scenario.
Gold has posted lower weekly closes in ten out of the last 14-weeks, going back to the April probe above 1360.00. From the 1365.26 high on 11-Apr to yesterday’s low at 1211.52 marks an 11.3% decline.
This all seems pretty negative, especially taken in conjunction with bearish chart formations for the rest of the precious metals complex. However, gold did bounce off the midpoint of the 1046.18/1375.17 range that has dominated since mid-2016. That midpoint is at 1210.67, while yesterday’s 12-month low was at 1211.52.
In years past, we have tended to get a seasonal bounce in the metals into the fall months. While I’m disinclined to pick bottoms, I’d look for opportunities to be a buyer in situations where risk is well defined.
At this point, it would take a move above the 9-day MA at 1237.09 to hint at a potential short-term bottom. You could take that hint a little more seriously on a close above the well-protected 20-day MA at 1246.82.
At this point, it would take a move above the 9-day MA at 1237.09 to hint at a potential short-term bottom. You could take that hint a little more seriously on a close above the well-protected 20-day MA at 1246.82.
Silver is higher today, but price action remains confined to yesterday’s range. Minor chart support at 18.17 successfully contained yesterday’s push to new 12-month lows. An eventual breach of this level would lend additional credence to the scenario that suggests potential is toward the 14.16 spike low from early-July of last year.
This will be the sixth consecutive lower weekly close for silver. It would take a rebound above former support at 15.61/76 to ease short-term pressure on the downside. This level corresponds with the 9-day MA at 15.69 today.
Platinum may just eke out a higher close on the week. A close above 826.43 would end the streak of consecutive lower weekly closes at five. However, yesterday’s tumble to a new 10-year low keeps focus squarely on selling strategies with potential toward the 732.50 low from October 2008.
Palladium is trading within yesterday’s broad range. Thursday’s violation of key support at 896.50 (06-Apr low) resulted in a new 12-month low at 859.06. Short-term upticks should be viewed as corrective in nature with downside potential to 836.03/827.05.
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.
