Gold was unable to sustain the probes below $1200 earlier in the week, as haven interest seems to be counteracting the headwind posed by persistent dollar strength. The yellow metal remains generally well bid at the high end of yesterday’s range as the greenback consolidates this week’s move to new 16-month highs.
Sterling is back under pressure, providing some lift for the dollar, amid ongoing Brexit drama. After Theresa May got her cabinet to approve the draft Brexit deal yesterday, several cabinet members and MPs have resigned. More than two years after the people of the UK voted to leave the EU, this is morphing into a full-fledged political crisis. There is heightened talk that Ms. May will face a no confidence vote and that a second referendum may be in the cards.
This degree of Brexit and political uncertainty is bad both for the UK and Europe. While Sterling and euro weakness will underpin the dollar, safe-haven interest will likely provide some support for the precious metals as well.
As pointed out in this morning’s Zaner Daily Precious Metals eNewsletter, gold also seems a little less worried about Fed tightening plans. Gold’s reaction to yesterday’s strong CPI print was very different than its reaction to the PPI beat last Friday. The inflation theme itself, rather than the Fed’s likely reaction to it, may be moving to the fore. Gold is of course the classic hedge against inflation.
A rebound above 1219.08 (50% retrace of the recent losses) would return a measure of confidence to the uptrend. Such a move would put gold back above the 100-day moving average (1214.33 today), which would offer further encouragement to the bulls. The 20-day MA comes in at 1223.14 today.
This week’s lows at 1197.72/1196.31 reinforce the whole $1200 zone as an important support. However, generally lackluster momentum on the rally off of the August lows — with a couple exceptions — still warrants a measure of caution. So too does the recent comparative weakness in silver.
Silver set a new low for the year at 13.90 yesterday as the gold/silver ratio stretched to a new 25-year high above 86. However, the losses in silver could not be sustained ant the 13.65 low from 14-Dec -15 was left protected. The rebound to a higher high and the close above the previous day’s high constitutes a key reversal and today’s upside follow-through is encouraging. Nearly 38.2% of the recent leg-down has already been retraced and the ratio has retreated to 85 as well.
A rebound above 14.41/49 is needed to add some confidence to the more favorable short-term tone. This level is marked by 50% retracement of the recent decline and the 50- and 20-day MAs. Silver however has consistently disappointed on rallies this year so caution is advised.
Platinum has stabilized somewhat and is trading within yesterday’s range after recent tests of the downside stalled ahead of the 100-day moving average (822.02 today). While the trendline off the August low has been penetrated on an intraday basis, we have yet to see a close below the trendline. Look for platinum to garner some support from the latest surge to new all-time highs in palladium.
Palladium has surged through resistances at 1139.80 and 1121.19 to establish new all-time highs. With the supply/demand fundamentals still positively aligned, palladium remains on track for a challenge of the 1200, psychological barrier and the 1223.25 Fibonacci projection. Take note that the latter corresponds closely with gold parity.
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.
