Spot gold continues to consolidate within last week’s range. The yellow metal is being underpinned by a softer dollar, but has been unable to generate any upside momentum thus far.

It seems that recent escalations of the trade war between the U.S. and China are now being discounted. Both Treasuries and the dollar have been displaying weakness this week.

This may be a result of China’s more measured response to the latest round of U.S. imposed tariffs. Chinese Premier Li Keqiang also pledged today that China would not competitively devalue the yuan in order to boost exports.

There may also be a growing realization that a 50% retracement of last year’s decline in the dollar raises U.S. growth risks. The rally in the dollar that has dominated much of this year makes U.S. goods and services more expensive for foreign buyers, sapping overseas demand.

 he dollar index set a new 7-week low on Tuesday and traded below its 100-day moving average for the first time since April. A close below the 100-day MA (94.54 today) has yet to be registered, but were that to occur, additional downside potential to 94.08/00 would be anticipated.

Whether that’s enough to lift gold out of the recent range remains to be seen. A breach of the recent corrective highs at 1212.66/1214.32 is needed to set a more favorable short-term technical tone. Such a move would also constitute a violation of the 50-day moving average (1208.18 today). Potential at that point would be toward 1238.58, which marks a 38.2% retrace of the decline from 1365.26 (11-Apr high) to 1160.27 (16-Aug low).

On the downside, Monday’s low at 1192.83 protects the more important 1187.77 low from last week.  Secondary support is noted at 1183.88/15.

Given the recent lackluster trading, a range breakout in advance of next week’s FOMC meeting seems unlikely. While the Fed is widely expected to hike rates by 25 bps, markets will be focused on guidance, economic projections and chairman Powell’s comments in an effort to ascertain the likely pace of policy moves going into 2019.

Silver edged higher within the recent range to pressure last week’s high at 14.25. Additional resistance is provided by the 20-day moving average (14.36 today). A close above this level is needed to ease short-term pressure on the downside. Such a move would shift focus to 14.51 (04-Sep high) initially.

At this point however, the trend remains negative. It would be premature to rule out further tests below $14. However, the recent pullback in the gold/silver ratio — albeit modest thus far — is somewhat encouraging.

Platinum is higher again today, notching more 5-week highs. The targeted 830.00 level is within striking distance. A push through this area would highlight the down-trending 100-day moving average (846.78 today).

Palladium is up another 2.5% today after finally taking out the formidable 989.50/992.43 zone. More than 61.8% of the decline from 1139.62 (15-Jan high) to 832.15 (14-Aug low) has now been retraced, returning considerable credence to the dominant underlying uptrend.

The next resistances to watch are 1057.62 (19-Apr high) and 1067.05 (26-Feb high). However, the developing overbought condition warrants a measure of caution at this point.


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