Spot gold is trading modestly higher to begin the week, buoyed by a softer dollar and recent strength in the yuan. The yellow metal is currently trading more than 2% off the 19-month low set last week at 1160.27.
There seems to be some hope that this week’s low-level trade talks between the U.S. and China will bear fruit, which has nudged up risk appetite. Normally you might expect a ‘risk-on’ environment to weigh on gold, but the dollar and Treasuries have been the primary beneficiaries of diminished risk appetite as trade tensions have risen in recent months, so they are under some pressure today.
Gold may be getting a bit of a haven bid from the deteriorating situation in Venezuela as well. President Nicolas Maduro announced a massive currency devaluation of 95% over the weekend. The new currency will be called the sovereign bolivar and will be linked to the Venezuelan crypto-currency, the petro. The petro in turn is linked to Venezuelan oil prices.
Out of the frying pan and into the fire… It seems like linking the new currency to the petro is a gimmick at best; and at worst, an out-and-out scam on the Venezuelan people.
According to Bloomberg:
"Critics have questioned the token’s trustworthiness. Some ratings sites have called it a fraud. Initial coin offering ratings website ICOindex.com categorizes the Petro as a scam, saying there’s a lack of key technical information including how the cryptocurrency is actually backed by oil, as well as concerns the Venezuelan government won’t be able to manage complex blockchain technology."
Gold might have been the better option, but Venezuelan gold reserves fell to a record low of just 150 tonnes in Q2. I imagine that the hope was that the latest devaluation might buy the beleaguered nation a little time, but the scheme is being met with a great deal of skepticism.
The 9-day moving average for gold is at 1194.08 today. This indicator has attracted selling interest in recent weeks and kept the more important 20-day MA (1207.93 today) protected. A close above the 20-day would ease at least short-term pressure on the downside.
We’ve been watching the COT report for gold futures for some time now, noting the shift from net long to net short positioning. That was confirmed in the 14-Aug COT report. “[S]pec traders have finally shifted a net long to a net short position. Therefore, the potential for technical stop loss selling should ease but not halt in the event that demand fears dominate the marketplace, according to the Zaner Daily Metals Newsletter.
Silver continues to consolidate last week’s sharp losses below $15. The 9-day moving average (14.97 today) has been a pretty reliable indicator for silver bears as well. Sell the 9-day with risk above the 20-day has worked pretty consistently since mid-June.
The trend remains decisively bearish in the wake of last week’s establishment of a 2½-year low at 14.33. This level now defines a good intervening barrier 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.
Platinum continues to recover from last week’s near-10-year low at 754.03. However, the technical picture remains quite bearish. Given the sharp drop seen last week, we could see platinum regain 800.00 and then consolidate for a period to relieve the oversold condition.
Palladium is trading above its 20-day moving average (909.20 today). Well over 61.8% of the latest leg down has already been retraced. While the technicals for this market are more favorable, I don’t think palladium is going to run unless we see confirmation in gold in silver.
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