Gold is trading lower for a third consecutive session, weighted by continued trade concerns and the resulting rebound in the dollar. However, heightened geopolitical tensions and persistent uncertainty associated with Brexit are seen as limiting factors on the downside.

Russian naval vessels fired upon and then seized three Ukrainian ships in the Black Sea off the coast of Crimea on Sunday. Russia claims the Ukrainian ships had violated its territorial waters. Russia annexed Crimea from Ukraine in 2014.

The UN Security Council met yesterday to discuss the crisis. The best they could do was call on Russia and Ukraine to “exercise maximum restraint.” U.S. ambassador to the UN Nikki Haley was more forceful, accusing Russia of “outlaw actions” and hinting at additional sanctions.

In a Wall Street Journal interview yesterday, U.S. President Donald Trump said that he expects to move ahead with raising tariffs on $200 bln in Chinese exports. He also warned that he would slap tariffs on the remaining Chinese goods, not currently being taxed, if upcoming negotiations don’t go favorably.

This hardline ahead of the G20 meeting, where Trump is expected to meet with Chinese President Xi, is likely a negotiating tactic. While the stock market doesn’t seem overly concerned today, the market remains fragile in the face of recent losses.

By most accounts, Theresa May’s efforts to rally support for her Brexit deal are not going so well. Even President Trump weighed in, saying it “sounds like a great deal for the EU.” Political uncertainty prevails in the UK.

Weakness in both the pound and the euro continue to buoy the dollar, which is creating a headwind for gold. The dollar index has moved decisively back above the 97.00 level, bringing the 97.69 peak from 12-Nov back within striking distance.

Gold is into support at the 1211.97/1208.82, which has contained the downside thus far. This level is marked by a minor chart level, the 100-day moving average and trendline support. A push through this level, particularly on a closing basis would favor a return to the $1200 zone.

On the upside, the 20- and 9-day moving averages at 1220.45 and 1221.48 respectively, must be regained to ease short-term pressure on the downside. Last week’s high at 1230.09 must be regained to return credence to the rather tepid uptrend that began back in August.

Silver remains on the defensive as well. Just over 61.8% of the rebound over the previous 2-weeks has been retraced, detracting from the potential double bottom pattern. Continued strength in the gold/silver ratio is another cause for concern for silver bulls.

Platinum continues to consolidate at the lower end of the 877.78/824.50 range. However, today’s drop below the 50-day MA (836.61 today) is cause for additional concern. The 100-day MA comes in at 822.23 today, bolstering the range low somewhat.

Palladium has recovered much of Friday’s sharp 3% drop. While price action remains confined to Friday’s range, the inability of palladium to sustain the violation of the 20-day MA (1130.57 today) and the trendline keeps the bias favorable.

The supply/demand fundamentals for this market remain positive. However, the divergences that have developed over the past several months warrants a measure of caution.


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