Gold remains defensive in holiday thinned U.S. trading, sliding to new 4-week lows as the dollar index surged to new 16-month highs. The U.S. bond market and the Fed are closed today in observance of Veterans Day.

The dollar remains on the bid after a hawkish policy statement last week along with hotter than expected producer inflation. This has increased the likelihood of a December rate hike, as well as further tightening into 2019.

Meanwhile, the euro is under pressure amid mounting growth risks and the latest warning on Italian contagion from ECB vice president Luis de Guindos. Sterling is also under considerable pressure as prospects for a Brexit deal dimmed.

Persistent dollar strength poses a considerable headwind for gold and the retracement that began last week favored a return to the all-to-familiar $1200 area. Besides congestive chart support, this level is also marked by the 50% retracement level of the recent rally and near term trendline support.

A convincing push below $1200 would put the September lows at 1183.01/1180.77 in play. The latter is the last significant barrier ahead of the 1160.72 low for the year (16-Aug). Gold needs to climb back above 1211.51/97 to revive optimism among the bulls.

Silver has retreated to the an 8-week low, slightly exceeding the 14.05 low from 17-Sep. This leaves the 13.95 cycle low from 11-Sep vulnerable to a challenge. Below that, the critical 13.65 low from 14-Dec-15 would be in play. A climb back above 14.45/50 is needed to ease short-term pressure on the downside.

Platinum is testing support marked by the 20-day MA and the 3-month trendline at 845.00/843.51. A close below this level would leave the downside vulnerable to the 822.62/820.50 support level.

Palladium has probed its 20-day MA (1104.40 today) as well. We’ll watch this level on a close basis, but losses still appear to be corrective in nature. Secondary support is noted at 1094.93 (61.8% retracement of the recent challenge of the upside).


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