Gold is consolidating after posting fresh 3-month highs on Tuesday. The yellow metal remains underpinned by haven interest, despite 9-week highs in the dollar index.

The dollar has been boosted by weakness in the euro, which saw the EUR-USD rate fall through support at 1.1433/32 as weak EU data highlighted risks to growth. With more than 78.6% of the rally off the August low now retraced, the 1.1301 low from 15-Aug is the next technical attraction.

This comes at an inopportune time for Europe’s third largest economy. Brussels rejected Italy’s draft budget yesterday and gave them 3-weeks to make revisions. Amid mounting growth risks, the EC is even less likely to show any flexibility on budget deficits outside the Growth and Stability Pact rules.

“Italy no longer wants to ne a servant of silly rule,” said Deputy Prime Minister Salvini. Such an attitude is likely to foster further animosity between Brussels and Rome, which heightening talk of an Italian-exit.

We’ve talked a lot recently about gold’s resiliency in the face of dollar strength. The last time the dollar index was this high was 17-Aug; gold closed at 1184.64. The yellow metal is nearly 4% higher today.

In the wake of yesterday’s decisive close above the 100-day moving average, scope remains for additional gains toward 1256.74 (measuring objective off the symmetrical triangle breakout) and 1262.76 (50% retrace of the April to August decline). The 100-day MA is at 1223.39 today, bolstering support marked by yesterday’s low at 1221.94.

Silver is consolidating at the upper end of yesterday’s range. A breach of key short-term resistance at 14.85/92 is needed to clear the way for a push above $15. We haven’t seen a 15-handle in silver since mid-August.

Such a move would likely make the holders of the large short position in silver futures rather nervous. Focus would shift to the 100-day MA (15.20 today) initially, but I think potential would be to 15.64 (50% retrace of the decline off the June high).

Platinum is consolidating, still tracking the trendline off the June low. The technical bias remains favorable, with potential back to the 850.37 high from last week. Strength in palladium continues to offer support.

Palladium is consolidating within yesterday’s range. This week’s move to new all-time highs keeps focus on the upside. The next resistance I’m watching is at 1222.61 (127.2% retracement of the January to August decline. Such an upside extension would also bring palladium within striking distance of parity with gold.


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