Spot gold is modestly higher, buoyed by a softer dollar and reported “robust” physical buying in Asia. Nonetheless, sharp losses earlier in the week leave the yellow metal poised for a sixth consecutive lower weekly close.


MKS S.A. reported today that Asian physical demand remains “robust.” This may be an initial indication that the positive seasonal influence in gold is beginning to kick in. We’ll need to see some upside follow-through though.


This is the classic scenario of the west selling paper to the benefit of Asian physical buyers. The transfer of physical metal from west to east continues.  


The Turkish lira came under renewed selling pressure today after a several session reprieve. The U.S./Turkish row was further escalated after President Trump threatened additional tariffs and Treasury Secretary Steve Mnuchin said the U.S. could put additional sanctions on Turkey as well. Turkey said that they would respond to any new U.S. actions.


While the U.S. certainly has the stronger hand in this particular spat, the U.S. risks pushing Turkey over the brink, which could precipitate the next financial crisis. Europe and European banks have considerable financial exposure to Turkey and could get caught in the maelstrom. Additionally, there is a growing fear of contagion to other emerging countries that have also built up considerable leverage during the past decade of easy money.


“The more the dollar rises, the more EM currencies and related markets fall. Dollar-denominated debt then becomes too expensive to repay or service as the dollar rises relative to EM currencies. Before long default becomes the only viable option,” wrote Nomi Prins earlier in the week.


Gold is off more than 2½ percent on the week. According to Reuters, it’s the “biggest weekly loss since May 2017.” On the close today, a sixth consecutive lower weekly close will almost assuredly be confirmed. Focus remains squarely on the downside.


A full retracement to the 1122.61 low from 15-Dec-16 may still be in the cards. However, price action this week smacks of capitulation, which is often a precursor to a reversal.


Presently, gold is trading within yesterday’s range. A breach of yesterday’s high at 1182.01 might prompt some additional short-covering ahead of the weekend. However, more substantial resistances that might be suggestive of a true reversal — the most important being the 20-day MA at 1209.38 — are well protected at this point.


An inside day is evident in silver today as well. This will be the tenth consecutive lower weekly close for silver. The inability to build on yesterday’s corrective action thus far, keeps focus on the dominant downtrend.


A 2½-year low was established yesterday at 14.33, which now marks support ahead of the key 13.64 low from 2015. Resistances are defined by the intraday high at 14.76, yesterday’s high at 14.83 and then the more important 14.95/15.05 zone. A breach of the latter is needed to ease short-term pressure on the downside. A close above the 20-day MA at 15.25 is needed to suggest a reversal has occurred.


The gold/silver ratio has come off the midweek high of 82.00, but remains above 80.00. As our own Pete Thomas pointed out earlier in the week, when the ratio is above 80.00, it has historically been a good opportunity to swap gold for silver. You can call Pete at 312-277-0140  and he will happily elaborate!


Platinum is down 6% this week and will also notch a tenth consecutive lower weekly close. A new near-10-year low was established yesterday at 754.03 and the low from 2008 at 732.50 remains vulnerable to a true test.


Palladium is displaying some modest upside follow-through and is flirting with its 20-day moving average at 908.75. Yesterday’s outside day with a higher close was a bullish event, but the more favorable key reversal was averted by the fade into yesterday’s close.


A close above the 20-day would offer further encouragement, but as noted yesterday, palladium is not generally a leader. Therefore we’ll look for some confirmation in gold and/or silver before getting too bullish.



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