Spot gold remains well bid above the $1200 level in the wake of Friday’s rebound. The yellow metal is being underpinned by continued softness in the dollar.

Gold got a boost on Friday from Fed chair Powell’s speech at Jackson Hole. Mr. Powell struck a more cautious tone, suggesting there was no reason to speed up the pace rate hikes.

Gold ended a streak of six consecutive lower weekly closes on Friday and closed above its 20-day moving average for the first time since mid-June. Upside follow-through early this week may spark additional short covering.

Given the record net short position that had developed in recent weeks, there’s plenty of fuel for such a short covering rally.  A breach of the high from two-weeks ago at 1213.87 would also constitute a violation of the trendline.

20180827 Gold Chart

Such a move would lend credence to the bottoming scenario and bode well for an upside extension into the 1230/1240 zone. Chart resistance, the 50-day moving average and 38.2% retracement of the April to August decline highlight this area.

Despite the recent pullback in the dollar, the spec long position in the dollar index grew for an 18th consecutive week. There is a belief that the U.S. stands the best chance of being the least damaged by the ongoing escalation of the trade war.

Trade talks with China last week failed to make any progress and both sides imposed new tariffs on the other. However, President Trump is expected to announce a trade deal has been struck between the U.S. and Mexico. Reuters, citing a U.S. trade official, is reporting that it is a bilateral trade deal that would replace NAFTA. It seems like that may leave Canada out in the cold…

Silver is edging higher, but remains below $15 and still well within the range that was established two-weeks ago. The chart pattern still appears to be corrective, although continued strength in gold may pull silver higher.

A close above the 20-day moving average (15.03 today) would ease short-term pressure on the downside and clear the way for a return to the 15.25/50 zone. The latter is marked by congestive chart resistance, 38.2% retracement of the decline off the mid-June high at the 50-day moving average.

Platinum has surged to challenge the 20-day moving average at 806.55 on the thawing of trade tensions with Mexico. A close above this level would favor additional gains to the 818.83 Fibonacci level initially.

Palladium is adding to last week’s gains and a 38.2% retracement of the entire decline of the mid-January high at 1139.62 is nearly complete. This Fibonacci level comes in at 951.06. The important 100-day moving average comes in slightly higher at 957.23.


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