Spot gold was unable to sustain this week’s probes above $1200, leaving the previous corrective highs at 1212.66/1214.32 intact. Despite Friday’s intraday pullback, the yellow metal appears poised to log its first higher weekly close out of the last 4-weeks.
The yellow metal was weighed ahead of the weekend by a bounce in the dollar that was driven by sharp drop in Sterling. The pound took a hit after Britain’s Prime Minister Theresa May declared that Brexit negotiations were “at an impasse.”
The PM expressed a resolve to proceed with Brexit, without a deal if necessary. “No deal is better than a bad deal,” said May.
Despite the rebound in the dollar, Thursday’s high at 94.56 was never in jeopardy. Considerable technical damage was done on the DX chart this week with the convincing move below the 100-day MA (94.57 today). Scope remains for a short-term challenge of chart/Fibonacci support at 93.71/65.
With the FOMC meeting next week, volatility may be limited in the first half of the week. A 25 bps rate hike is widely expected. Focus will be on the Fed’s guidance, economic projections and chairman Powell’s comments as the market try to ascertain whether there will be any change to the policy path going into 2019.
Gold shrugged off the retreat in the dollar this week, leaving the short-term tone neutral within the dominant downtrend. However, the consolidation seen this week has the appearance of base-building price action.
A breach of resistance at 1212.66/1214.32 is needed to lend some credence to a bottoming scenario. Such a move would highlight the 100-day moving average (1244.79 today). If support at 1187.77 gives way first, the downtrend will remain highlighted.
Silver showed a little more life on the upside this week, reaching a 2-week high of 14.44 before retreating into the range. Silver is poised to notch just its second higher weekly close out of the past 15-weeks.
The comparative strength in silver versus gold is reflected in the ratio’s retreat below 84. The gold silver ratio closed lower every day this week with the exception of Monday. While there may be early indications of a top in the ratio — which would be suggestive of a bottom in silver — it’s still too early to make that call.
Platinum set a 6-week high at 839.19 on Friday before retreating into the range. The higher high with a lower close is perhaps a modest concern for the bulls, but there are more positives than negatives at this point. I suspect short-term downticks will continue to be viewed as buying opportunities.
Palladium extended to the upside once again to enter the 1057.62/1067.05 target zone (19-Apr high and 26-Feb high respectively). Given the developing overbought condition, some profit taking ahead of the Fed meeting would not be surprising. However, given the strong technical and strong fundamental picture, buying strategies are likely to remain favored.
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