Spot gold traded briefly back above the $1200 level, but has been unable to sustain these intraday gains thus far. The yellow metal has retreated into the range and is presently trading near unchanged on the day.
As noted in recent commentary, selling at the 9-day moving average (1190.54 today) with risk above the 20-day MA (1204.72 today) has been a pretty successful strategy of late. Today’s intraday retreat suggests some traders are still eying these indicators, but success or failure this time around is likely to hinge on the interpretation of the FOMC minutes.
The minutes from the July 31 – Aug 1 FOMC meeting come out 14:00ET today. There is an expectation that the minutes will clarify the upgraded growth outlook, and whether that optimism has the Fed the leaning toward rate hikes in both September and December. The level of concern at the Fed regarding trade tensions and emerging market volatility will also be of interest.
There has been heightened talk this week that only one more hike is in the offing. Atlanta Fed President Raphael Bostic reiterated on Monday that he sees only three rate hikes this year. “I came in the year with three moves and I am still in that space,” said Bostic.
That may have further tempered dollar bullishness. The dollar index set a 13-month high at 96.98 last week, before coming under selling pressure. Initial selling may have been the result of profit taking in the face of a rather significant overbought situation.
Subsequently, news that China was sending a delegation to the U.S. in the hopes of restarting trade talks prompted heightened risk appetite. That put additional pressure on the dollar as funds flowed out of Treasuries and the dollar and back into commodities and shares.
The DX is trading lower for a fifth consecutive session. Yesterday’s close below the 20-day moving average was seen as confirmation that at least a short-term top is in place. The 50-day moving average at 94.98 has been pressured today. Trendline support comes in at 94.69 today.
The recent weakness in the dollar has served to bolster the precious metals, which had been quite oversold after dropping to new cycle lows last week. Interestingly, palladium is displaying the best technical picture since the 13-month low at 832.15 was established last week.
Palladium had been weighed by worries that the developing trade war would weigh on auto demand. Palladium seems to have taken heart from the low level trade talks between to the U.S. and China that are slated for today. News that the U.S. and Mexico are on the verge of a NAFTA framework is also helping to keep a bid under palladium.
Platinum seems to be struggling somewhat around its 9-day moving average. Recent price action has more of a corrective than a bottoming feel to it, but I don’t anticipate platinum diverging meaningfully from palladium at this point.
The story is the same for silver. Recent price action seems to be corrective/consolidative within the dominant downtrend. Silver set a 2-½ year low at 14.33 last week. The rise in gold/silver ratio back above 81, is reflective of that comparative weakness in the silver market.
A close back above $15 is needed to offer some further encouragement to the bulls. The 20-day MA comes in at 14.82 today and the 20-day is well protected at 15.15 for now.
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