Spot gold heads into month end in a weak position, just off the cycle low at 1211.52 from 19-Jul. The yellow metal is about to notch its fourth consecutive lower monthly close. That’s the longest losing streak since the four-month decline into year-end 2013.
Not even is the recent soft tone in the dollar has offered much in the way of support for gold of late. However, it just may be preventing a push to new 15-month lows.
It’s always darkest before the dawn. As Carley Garner of DeCarley Trading (a division of Zaner Group) reminded us last week, seasonal trends in the gold market have historically made July a good buying opportunity. Additionally, “market sentiment appears to be extremely pessimistic and ripe for a shift,” said Garner.
While gold continues to look weak, it’s worth remembering that key support at 1204.72 (10-Jul-17 low) remains intact. The low from two-weeks ago at 1211.52 provides good intervening support. Also, the midpoint of the 1046.18/1375.17 range that has dominated since that high was established in July of 2016 comes in at 1210.67.
As we’ve been saying for some time now, a close above the 20-day moving average (1236.81 today) is needed to lend some credence to the bottoming scenario. The 9-day MA (1225.31 today), along with Monday’s high at 1227.36 mark initial resistance.
The dollar index has bounced off the short-term trendline, buoyed by weakness in the yen and euro. The yen has been weighed by BoJ plans to stick with ultra-easy policy even as the rest of the major central banks are going with tighter policy. The euro was hit after Eurozone Q2 GDP slowed to 2.1%, from 2.5% at the end of Q1.
Adding additional weight to the euro was a pessimistic IMF report on Greece. Even after a decade of bailouts, the IMF warned that Greece still has "extraordinarily high levels of public debt, non-performing loans, unemployment and high poverty rates."
Reports that the U.S. and China are to restart trade talks boosted the yuan and stocks. Renewed strength in the yuan may be limiting the upside in the dollar initially.
The Fed’s two-day FOMC meeting began today. The policy statement will come out tomorrow at 2:00ET. Policy is not expected to change, but any changes to guidance will as always be of interest.
The more important policy decision will come from the BoE on Thursday, just because there is an expectation for a 25 bps hike. Amid sluggish growth and persistent Brexit worries, there are some concerns surrounding such a move. As noted yesterday, if the BoE does hike, it would be just the second tightening in eleven-years.
Silver is looking slightly more constructive, after catching a bit of a bid from in front of Monday’s low at 15.32. With silver once again above the 9-day MA (15.47 today), the short-term attraction may be the 15.67/15.70 resistance level (Friday’s high and the 20-day MA). A close above the latter would offer some encouragement to the bottoming scenario.
Platinum has moved convincingly back above the 20-day MA (832.23 today). The recent volatility may be indicative of a bottom. A close above the 20-day would be encouraging, but we had one of those last week that could not be sustained. A breach of last week’s highs at 845.10/27 would favor at least modest upside follow-through to 858.89 (09-Jul high).
Palladium remains generally firm, having approached last week’s highs at 941.25/78. A breach of this level would suggest potential back to the 950.00 zone. A move in gold back above 1240.00 might be the catalyst for firmer prices in the platinum group metals.
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.
