Gold traded convincingly below the $1200 level in overseas trading, even as the dollar consolidated Monday’s sharp gains. While the yellow metal’s foray below $1200 was brief, the downside remains vulnerable with the market focused on Fed rate hike expectations and the greenback.

Both the euro and sterling have recovered somewhat today, bolstered by a hint of revived optimism on a Brexit deal. According to UK trade secretary Liam Fox , “difficult discussions” over the Irish Border are ongoing.

Brexit without a deal would be bad news not only for the UK, but for the EU as well. Headlines over the past weekend painted a pretty bleak picture, with political pressure mounting on Theresa May. Sterling and euro weakness have been helping to push the dollar higher, creating a significant headwind for gold.

Weakness in the broader commodities sector, led by crude oil, is weighing on the precious metals as well. Crude oil appears poised for a 12th consecutive lower close. That would be another new record for WTIs losing streak, dating back to 1983.

As traders bail out of commodity funds and ETFs on concerns of oversupply, they are selling precious metals and other commodities as well. However, these pressures may be set to subside as OPEC members cut back production now that it is apparent that Iran will continue selling oil.

The recent retreat in gold prices seems to have inspired some fresh physical interest. “It’s been some time that we have seen this level, so we are seeing some buying here," said Ronald Leung of Lee Cheong Gold Dealers in Hong Kong.

It seems unlikely that physical buying will be able to fully counterbalance commodity fund outflows and algorithmic selling based on new 16-month highs in the dollar. Gold remains vulnerable to the 1183.01/1180.77 lows from September. A rebound above 1211.51/97 is needed to ease short-term pressure on the downside. Today’s intraday high at 1205.22 provides intervening resistance.

Silver fell to a new 8-week low, pressuring the 13.95 low from 11-Sep. A breach of this level would clear the way for a challenge of the critical 13.65 post-financial-crisis low from 14-Dec-2015.

With the gold/silver ratio pressuring 86, the path of least resistance for silver is to the downside. Silver bulls need to look once again at the gold market for salvation.

If gold finds support, it could provide some underpinning for silver. The latter needs to regain 14.50/53 to offer some encouragement to bottom pickers.

Platinum is trading lower for a 4th consecutive session and is testing trendline support drawn off the 754.03 low from August. A close below the 20-day moving average (843.46 today) today would favor a challenge of the 38.2% retracement level of the rally at 830.51. Below that, the 50- and 100-day MAs are in play at 826.99 and 822.35 respectively.

A rebound above 857.16/859.20 is needed to return a measure of confidence to the uptrend. Platinum may get a little help here from comparatively buoyant palladium.

Palladium is the odd metal out today, trading higher on the day, but within yesterday’s range. The move back above the 20-day moving average is encouraging and the 9-day (1116.23 today) is being pressured. Supply and demand dynamics remain supportive for palladium, but the uptrend seems to be paused until the more general commodity sector weakness (oil!) is sorted out.



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