Gold is up nearly 2% and trading at new 10-week highs. The breakout of the range that has dominated since late-August bodes well for further gains. The yellow metal has regained support from haven buyers in the wake of yesterday’s sharp sell-off in stocks.
Goldman Sachs explains yesterday’s stock carnage as a re-pricing of U.S. growth prospects. Even though shares seem to have stabilized at least temporarily, gold is maintaining its bid. The fact that gold is leading silver higher is further evidence that the bid is largely safe-haven in nature.
President Trump cast the blame for the stock market sell-off at the feet of the Fed, suggesting that the central bank “has gone crazy.” With U.S. 10-year yields at 7-year highs. The 30-year yield is at 4-year highs.
U.S. CPI rose 0.1% in September, below expectations of +0.2%, versus +0.2% in August. The annualized pace of consumer inflation fell to 2.3%, down from 2.7% y/y in August. Core CPI also rose 0.1%, below expectations of +0.2%, versus +0.1% in August. The annualized pace of core CPI held steady at +2.2%.
The IMF warned earlier in the week that global inflation is expected to accelerate this year. That may indeed be true and U.S. inflation has risen this year to be sure. However, the September data seem to suggest those modest pressures ebbed last month, although probably not enough to alter Fed rate hike expectations.
The violation of formidable resistance in gold at 1211.06/1212.23/1214.32 bodes well for an upside extension toward the 100-day MA (1229.90 today). However, a measuring objective off the range breakout highlights the 1247.87 level.
Gold is once again comfortably above the 20-day and 50-day MAs and will likely close above these indicators of trend. It’s too early to say definitively that a bottom is in place, but the evidence is building.
Another retreat below $1200 now would be really troubling. Secondary support is marked by the overseas low at 1191.30.
Silver has jumped to new highs for the week. More than 38.2% of the recent decline has been retraced. The halfway back point is at 14.60 and corresponds closely with the 50-day MA. A push above 14.60 would bode well for a retest of the 14.92 high from 02-Oct.
Platinum is engaged in a retest of the 100-day MA (833.74 today). A breach of the small potential double top 839.19/836.80 would reestablish the corrective uptrend, highlighting the 38.2% retracement level of this year’s decline at 859.92.
Palladium has set new 8-month highs above 1095.90 (28-Sep high). Recent corrective action has relieved the overbought condition, which should allow for a challenge of the all-time high at 1139.62 (15-Jan).
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