Gold is down for a third consecutive day this week, weighed by revived risk appetite and a rising dollar. The yellow metal set a nearly 3-week low at 1211.97, but still appears poised to score its first higher monthly close since March.

The dollar index has pushed to new 16-month highs, levels last seen in June of 2017. Scope is seen for further gains toward 97.78, the 61.8% retracement level of the decline from 103.82 (03-Jan-17 high) to 88.25 (16-Feb-18 low), which should continue to pose a headwind for gold.

However, in the midst of a trade war with China, I find myself wondering just how much more dollar upside the Trump administration is willing to endure. The dollar set a new 10-year high against the Chinese yuan today at 6.9782, just shy of the important 7.00 level.

I suspect a 7-handle will warrant a response from the President; perhaps even something as strong as Treasury labeling China a currency manipulator.

As we pointed out yesterday, weaker U.S. exports, stronger imports and a record trade deficit are very much a function of dollar strength. It’s hard to declare you’re winning the trade war, with the trade data screaming otherwise.

The Fed’s tightening campaign plays a role as well, with higher U.S. yields providing an additional tailwind for the greenback. Mr. Trump has already taken some notable swipes at the Fed for their policy decisions.

At this point, gold has retraced about 38.2% of the rally off of the August low and is back below its 100- and 20-day moving averages. A true breach of this retracement level at 1211.67 would return focus to all-to-familiar 1200.00 area, which also marks the halfway back point of the rally (1201.85).

A rebound above the 20-day (1218.08 today) and 100-day (1219.88 today) MAs would offer some fresh encouragement to bulls. The 1227.70 retracement level is probably a little more important. Let’s see how gold comes out of the gate in November.

Silver has tumbled to 3-week lows to pressure chart support at 14.25. More than 61.8% of the rally off the September low has now been retraced and silver is once again back below the near term trendline and its major moving averages.

In addition, the gold/silver ratio is trading back above 85.00, suggesting near historic weakness in silver relative to gold. The bears are back in control with a lower monthly close is imminent.

Platinum continues to hang tough, with the 20-day moving average and the trendline effectively containing the downside. That keeps us cautiously bullish, but recent weakness in silver and palladium warrants additional caution here.

Palladium has stabilized somewhat after the past several days of significant losses. An inside day is apparent, but short term momentum remains negative. A climb back above 1100.00/1102.92 is needed to ease pressure on the downside.


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