Gold is lower for a fifth consecutive session, having been unable to sustain the initial move to new highs on the week in the wake of Tuesday’s U.S. elections. Nonetheless, price action remains confined to last Thursday’s range as risk-on sentiment is being offset to some degree by a softer dollar and supply concerns.
Markets continue to absorb the results of Tuesday’s U.S. election results. A divided Congress is expected to hamstring President Trump and his generally pro-business agenda, while saddling the White House with a multitude of investigations.
Initial indications are that the President is inclined to maintain his adversarial relationship with Congressional Democrats, so political gridlock seems to be in the offing. Yet stocks rose sharply on Wednesday and remain well bid today; perhaps simply on relief that the elections unfolded generally in line with expectations.
Whether this rebound is sustainable or not remains to be seen. If it is not, and the two-year run in stocks is over, it could provide a tailwind for gold as investors seek to diversify their holdings and protect profits.
Statistic South Africa reported today that South African gold production tumbled 19% in September, versus a year ago. It was the biggest drop in output since 2015.
The FOMC will announce policy later today. No change is expected and I would not anticipate any change to the statement. The probability for a December rate hike stands at 75%. That may edge up if the Fed doesn't give any hint about heightened concerns that might suggest a more dovish leaning.
While gold set a new low for the week in earlier trading, it is presently trading only modestly lower on the day. A close above 1227.08/11 would put the yellow metal back above the 20- and 9-day moving averages, easing short-term pressure on the downside somewhat.
Such a move would bode well for a retest of the recent highs at 1236.43/1237.39. Above that, the cycle high at 1243.44 (26-Oct) is the more formidable barrier to watch. A breach of this level would return a measure of confidence to the 1262.76Fibonacci objective.
Silver also slid to a new low for the week and probed below the 40-day moving average (14.46 today). We're disappointed once again by the quick evaporation of silver's relative strength to gold. The ratio has rebounded above 84.70 and seems destined to test above 85 yet again.
Nonetheless, as long as chart support at 14.29/25 is intact, we'll at least maintain a neutral bias here with a slight favorable leaning. If this support gives way, the 13.95 low from 11-Sep would be back in play.
Platinum remains well bid within yesterday's range and within strking distance of the targeted 200-day MA (878.91 today). Above that, the halfway back point of this year's decline at 891.32 still looks appealing.
Palladium as rebounded from intraday downticks to keep focus on the upside. Scope remains for a retest of the 1151.29 all-time high (23-Oct) Above that, the 1223.25 Fibonacco level is the next objective.
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