Spot gold has recovered yesterday’s losses and probed above $1200, buoyed by a weaker dollar. If today’s gains prove sustainable, the yellow metal would post its first higher weekly close in seven weeks.

Fed chair Powell is speaking on "Monetary Policy in a Changing Economy" at the Jackson Hole Symposium. Most FedWatchers are expecting Powell to tow the “gradual tightening” line in this speech. While he may touch on the importance of Fed independence, I suspect he will avoid an out-and-out challenge of the recent pressure applied by President Trump.

"If it was just me I'd stand pat where we are and I'd try to react to data as it comes in," St. Louis Fed President James Bullard told CNBC this morning. Bullard worries that raising rates too much risks tipping the economy into recession. He seems particularly concerned about the flattening yield curve.

According to the CME’s FedWatch tool, the probability of a September rate hike is at 98.7%, all-but a sure thing. Prospects for a December rate hike have recovered to 67.8% after dipping to 62% on Thursday after the FOMC minutes that came out on Wednesday reflected heightened concerns about “ongoing trade disagreements.”

Two days of low-level trade talks between the U.S. and China have ended without any breakthrough. In fact, the latest round of U.S. tariffs kicked in while the talks were ongoing and the Chinese quickly retaliated in kind.

Rising trade tensions have driven safe-haven interest in U.S. Treasuries in recent months. Buy Treasuries requires dollars, so the greenback has benefitted as well. However, as the trade war has escalated more recently, the positive effect on the dollar and Treasuries has been muted as a resulted of rising risks to growth.

These concerns were articulated in the FOMC minutes this week. Today’s terrible durable goods data may reflect the fact that those risks are coming home to roost.

U.S. durable goods orders fell 1.7% in July, well below expectations of unchanged. It was the biggest drop in 6-months and may suggest that the trade war is starting to bite. If this is the case, bets that we’ll see a fourth rate hike in December are likely to be tempered.

That should be an offsetting force to any safe-haven flows into the dollar and Treasuries, which should in turn lift gold. The yellow metal is trading back above the psychologically significant $1200 and the important 20-day moving average (1201.72 today) has been slightly exceeded as well.

A close above the 20-day would ease short-term pressure on the downside and clear the way for a challenge of trendline resistance at 1210.68. Such a move would likely be cause for concern among the specs holding a record net short position. If they start covering, gold could jump back to the 1230/1240 range in a hurry.

Silver is consolidating within the range established earlier in the week. A breach of Wednesday’s high at 14.88 would clear the way for challenge of $15 and the 20-day MA at 15.07. A close above 14.73 is needed to end the string of consecutive lower weekly closes at ten.

Platinum has rebounded to its 9-day moving average after completing a 61.8% retracement of the recent corrective bounce on Thursday. The dominant trend remains bearish, but today’s recovery suggests the short-term corrective phase may not have run its course just yet.

Palladium has jumped to a new 4-week high and is up more than $20 today. This has been the best looking market from a technical perspective over the past week, gaining more than $90 (11%) from the 932.15 low on 16-Aug.

Today ‘s gains put palladium decisively above the 50-day moving average. A breach of the previous corrective high at 941.78 would put the 100-day MA at 957.06 in play.


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