Gold initially edged higher in holiday thinned trading, buoyed by continued haven interest associated with Brexit and ongoing weakness in stocks. However, the yellow metal has softened intraday, pressured by a firmer dollar.
Theresa May will return to Brussels on Wednesday to meet with EC President Jean-Claude Juncker. However, optimism that a deal will be struck remains in short supply and therefore considerable political risks remain for Ms. May.
Sensing the risks posed to both the UK and the EU, Spain is threatening to vote no on the draft Brexit deal unless there is some clarification on future talks over Gibraltar. Spain maintains a claim on Gibraltar, which was ceded to the British in 1713. Like Rahm Emanuel famously said, “You never let a serious crisis go to waste.”
U.S. stocks are under pressure again and have turned negative for the year. The all-important FAANG stocks fell into bear market territory on Monday, more than 20% off their highs. As investors rotate out of stocks, the precious metals are likely to benefit.
Gold has retraced more than 61.8% of the recent decline and the move back above the important 9-, 20-, 50- and 100-day moving averages is encouraging. These gains bode well for a retest of the 1243.44 high from 26-Oct. A breach of this level would put gold back on track for a push to the 1262.76 level, which marks 50% retracement of this year’s decline off the April high. It also corresponds closely with the 200-day MA (1263.24 today).
Silver pressured the 14.53 Fibonacci level (61.8% retracement of the drop from 14.92 to 13.90) but has since retreated into the range and is presently trading lower on the day and the week. The inability to sustain probes above the 20- and 50-day Mas is somewhat of a concern. We’ll be watching those levels — 14.45 and 14.46 respectively — on a closing basis today. Past disappointments leave us rightfully suspicious of rebounds in the silver market.
Initial support is noted at 14.35, which is bolstered by the 9-day MA at 14.27. I’m also watching resistance in the gold/silver ratio at 85.16/22.
Platinum has retraced all of yesterday’s gains to pressure the trendline once again (838.80 today). While we’ve seen a number of probes below the trendline in recent months, we have not seen a close below. The failure to sustain yesterday’s gains back above the 9- and 20-day MAs is a bit of concern.
Palladium is down for a second day, correcting from last week’s push to all-time highs. The next support to watch is at 1139.80/72, which is bolstered by the 9-day MA at 1135.50. Given the still favorable fundamentals, this latest dip will likely be viewed as another buying opportunity.
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