Gold is trading modestly lower, consolidating the solid gains recorded on Thursday. The yellow metal is being weighed somewhat by a rebound in the dollar on tempered trade deal optimism and a better than expected October jobs report.

While President Trump reportedly asked that a draft trade agreement be prepared, administration officials were quick to point out that a deal was not imminent. Nonetheless, the sense of optimism lingers, even as the September trade deficit came in larger than expected at -$54.0 bln.

The U.S. trade deficit with China grew to a -$40.2 bln (nsa) in September, a new record. That brings the year-to-date deficit with China to a whopping -$301.4 bln. Again, it’s hard to argue that the U.S. is “winning” the trade war when our trade deficit remains on the rise.

U.S. nonfarm payrolls for October came in at +250k, above expectations of +190k, versus a negative revised +118k in September (was +134k). The jobless rate held steady at 3.7%. Average hourly earnings rose 0.2%, in line with expectations.

Continued strength on the labor market suggests the Fed will continue to tighten policy. As interest rates rise, Treasuries become increasingly appealing. Overseas investors first need dollars in order to buy Treasuries.

The yellow metal needs to close above 1233.44 to notch a fifth consecutive higher weekly close. That would further bolster bullish optimism in the wake of the higher monthly close posted in October. That was the first higher monthly close in 6-months.

Today’s strong rebound – after a nearly perfect 38.2% retracement - put the yellow metal back above all the major moving averages once again. The new high for the week bodes well for a retest of the cycle high at 1243.44 set last week.

Scope remains for a short-term retest of the cycle high at 1243.44 (26-Oct high). A penetration of this level would bode well for an upside extension to 1262.77 (50% retracement of this year’s decline). Above that, we’re watching the 200-day moving average (1270.07 today).

We were happy to see silver take the lead on Thursday and today’s upside extension to challenge 14.92 offers further encouragement to the bulls; and likely some level of rising concern to the bears out there.

 Daily Silver Chart

Silver actually eked out a new 9-week high at 14.9204, versus the high from 02-Oct at 14.9170. We’ll wait for a more convincing violation and push above 15.00/04 level (28-Aug high and the 100-day moving average).

Today’s price action saw the gold/silver ratio slide to a 3-week low below 83. While the ratio subsequently rebounded somewhat, an outside week is evident on the weekly chart and the first lower weekly close in 5-weeks seems imminent.


Daily Gold/Silver Ratio Chart

It sure looks like a failure from above 85.00, although I’d like to see some additional retracement as confirmation. A breach of the 82.53 retracement level would clear the way for a retest of the more important 80.87 low from 02-Oct.

If silver can sprint to the upside and truly take the lead on the next leg-up in this rally, the long-awaited short squeeze may finally materialize. In that event, we could see 16.50 silver in a hurry. Assuming a retreat to 80 in the ratio, that would translate to 1320.00 in gold.

Platinum posted new 4-month highs again today, bringing the 200-day moving average at 881.62 within striking distance. A rise above this longer-term trend indicator would be a rather bullish technical event.

Focus at that point would shift to the 50% retracement level of this year’s decline at 891.32, but potential would be to the 61.8% retracement level at 923.72. Friday’s low at 858.99 and the previous high at 850.37 now mark initial supports.

Palladium has now retraced more than 61.8% of the recent sharp pullback. Considerable credence has been returned to the dominant uptrend and the all-time high at 1151.29 (23-Oct) is back in play. Above that, I still like 1200.00 and the 1223.25 Fibonacci projection.


Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Group LLC, unless otherwise expressly noted