Spot gold is trading lower after Friday’s corrective rebound failed to garner much in the way of upside follow-through. The precious metals continue to take their queues from the dollar, which is recovering from Friday’s weak close.


Last week’s attack on the Fed and the strong dollar by President Trump has not gained much traction. While Friday’s close in the dollar index below the 20-day moving average returned some credence to the topping scenario, the overseas probe below the 50-day MA could not be sustained.


While Mr. Trump may not have much ability to sway Fed policy at this point, he has two more appointments to make to fill out the seven member Board of Governors. He could conceivably go very dovish with those appointments in an effort to reign in the current tightening path of policy.


Wall Street analyst Dick Bove wrote an opinion piece for CNBC that says President Trump’s intent is to take control of the Fed:


“The president can and will take control of the Fed. It may be recalled when the law was written creating the Federal Reserve the secretary of the Treasury was designated as the head of the Federal Reserve. We are going to return to that era. Like it or not the Fed is about to be politicized.” — Dick Bove


One could argue that the Fed presently does the self-interested bidding of the banking system and politicizing the central bank would result in at least the goal of broader benefits. However, politicians have their own self-interests as well, namely getting reelected.


With that in mind, easier policy would be the logical order of the day, resulting in a weak currency. That’s what President Trump seems to want right now in an effort to stoke our late-cycle economy. The risk however is that inflation gets out of control.


Gold is of course the classic hedge against inflation. If the Fed is politicized, I’d want to be long gold.


Gold caught a bit of a bid in overseas trading amid saber rattling between President Trump and Iran. However, the brief probe above the 9-day moving average could not be sustained.


The downside remains highlighted with another run at the formidable 1211.52/1204.72 support zone likely. This level is marked by last week’s low and the low from 10-Jul-17. The midpoint of the 1046.18/1375.17 range comes in at 1210.67.


A push through this area would be a rather negative technical event. Minor support at 1194.88 would be targeted initially, but at that point scope would be for a challenge the 1046.18 low from December 2015.


Silver was unable to sustain intraday upticks above 15.50, leaving the 9-day MA at 15.62 protected. A rebound above 15.61/76 is needed to ease short-term pressure on the downside.


If last week’s low at 15.17 gives way first, additional credence would be lent to the scenario that calls for a challenge of the 14.16 spike low from last July.


Platinum is consolidating in a narrow range, straddling unchanged. After falling to new 10-year lows last week and recording a sixth consecutive lower close on Friday, focus remains squarely on selling strategies. Sights are set on the 732,50 low from October 2008.


Palladium has rebounded to approach its 9-day MA at 915.88. Where the other metals have faded intraday, palladium is sustaining its bid and continues to trade higher on the day. Nonetheless, last week’s definitive violation of key support at 896.50 set new 12-month lows and shifted focus to the 836.03/827.05 support zone.



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