Spot gold starts the week on defense as heightened risk appetite saps haven demand. Much of Friday’s gains have been retraced and the dollar remains generally well bid near the two-week high that was established on Friday.
Late on Sunday, Canada agreed to a new trade deal with the U.S. and Mexico. The new deal replaces NAFTA and significantly turns down the heat on the global trade war. This has caused a rise in risk appetite, which is buoying stocks and taken some of the haven bid out of the yellow metal.
Gold closed 0.56% lower for the week ended 28-Sep. Gold closed down 0.75% for the month of September and -4.8% for Q3.
While that all may sound fairly bleak, the fact that gold spent the month of September in just over a $30 range (and remains within that range) may warrant some level of optimism. The 61.8% retracement level of the corrective bounce from 1160.27 (16-Aug low) to 1214.32 (28-Aug high) successfully contained the downside last week at 1180.02. In fact, Friday’s intraday rally began from 1180.77.
While the net short speculative position in the futures market continues to grown — 17,648 contracts as of 25-Sep — spot gold was unable to muster a retest of the 1160.27 cycle low from August. Meanwhile, the commercials (the smart money) trimmed both long and short positions, but remain net long to the tune of 7,080 contracts.
That’s not to say that a bottom is in place by any stretch of the imagination and the lack of upside follow-through to begin the week is worrying. However, it would take a breach of support at 1180.77/02 to really put the 1160.27 low back in play.
On the other hand, a climb back above $1200 would bode well for a retest of the recent highs at 1211.06/1212.23/1214.32. Minor intervening barriers are noted at 1193.76 (Friday’s high), 1195.92 (halfway back of the recent decline), and 1197.46 (20-day MA).
Silver too has retraced much of Friday’s solid gains. More than 38.2% of the recent rally has been retraced, so we’re watching the 50% retrace level at 14.34 next.
Bright spots include the second consecutive higher weekly close recorded last week and the first higher monthly close seen since May. However, silver did lose 9.3% during Q3 and the trend remains bearish after establishing a 32-month low at 13.95 on 11-Sep.
It’s going to take a close above the 50-day MA (14.75 today) to ease pressure on the downside and shift attention to the 100-day MA at 15.52. Friday’s high at 14.72 now reinforces the former.
Platinum is firmer after bouncing off the convergence of the 20-day and 50-day moving averages at 807.46 and 806.40 respectively. A breach of Friday’s high at 824.09 would keep focus on the corrective rebound.
Palladium fell back to its trendline after a simple hook reversal formed on Friday. However, palladium is already more than 1% off the intraday low at 1045.47.
There may be additional corrective potential, but the recent pullback did serve to relieve the overbought condition somewhat. Setbacks are likely to be seen as buying opportunities.
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