Spot gold starts the week modestly higher, buoyed by a softer dollar. However, escalating trade tensions between the U.S. and China are likely to limit the greenback’s downside, which means the upside for gold is probably limited as well.

The Trump administration is expected to announce an additional round of tariffs on $200 bln in Chinese goods, perhaps as early as today, regardless of last week’s efforts to restart trade talks. China is likely to retaliate in kind, further escalating the trade war and driving additional safe-haven interest in the dollar.

However, China may be contemplating a more offensive posture moving forward according to a recent Reuters article. Reuters reports that an editorial in an official publication said that China is “looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the U.S.”

President Trump Tweeted the following this morning:

Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”

Interestingly, Mr. Trump’s pro-tariff tweet this morning didn’t have a negative impact on gold. Perhaps the additional impending tariffs are already priced into the market. On the other hand, their may be a growing level of concern over trade war escalation. If global growth risks intensify, the haven appeal of gold may supersede that  of the dollar.

Today’s rebound from Friday’s sell-off is somewhat encouraging, putting gold back above its 20-day moving average. However, the corrective high at 1214.32 (28-Aug) remains well protected at this point. This level is also bolstered by last week’s high at 1212.66.

On the downside, initial support 1192.96/83 protects the more important 1187.77 low from 11-Sep. Below the latter, the 61.8% retracement level of the recent corrective rally comes in at 1180.92.

A meaningful expansion of the range may prove difficult ahead of next week’s FOMC meeting. While the Fed is widely expected to hike rates by another 25 bps, investors will be looking for clues as to the central bank’s December intention. At this point, Fed funds futures suggest the probability of a December rate hike is around 80%.

Silver rebounded from Friday’s weak close and is presently trading more than 1% higher on the day. Price action remains confined to Friday’s range thus far, so it really hasn’t done much to improve the technical posture of the market.

Last week’s lower close in silver was the 13th out of the last 14. The last time we saw consecutive higher weekly closes was early-April. The trend remains bearish and it may just be the relative strength in gold that is preventing a challenge of the post-financial-crisis low at 13.64.

Platinum has recouped most of Friday’s losses, but the recent series of lower highs and lower lows takes a bit of the shine off the market ahead of the 50-day MA (809.59 today). A breach of 811.87/813.11 is needed to keep palladium on track for additional corrective gains toward 830.00.

Palladium remains well bid within the recent range, keeping pressure on the recent highs at 989.50/992.43. These highs are bolstered by the 50-week (987.95 today) and 200-day (989.54 today) moving averages. A push through this zone is needed to clear the way for a challenge of $1,000.


Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Group LLC, unless otherwise expressly noted.