Gold remain well bid on the final day of 2018, underpinned by strong technicals, haven interest and a soft dollar. Despite the solid performance into year-end, the yellow metal appears poised to notch its first lower annual close since 2015. Thanks to the Q4 gains though that loss is likely to be less than 2.0%.
Risk appetite recovered somewhat after President Trump tweeted over the weekend that he had “a long and very good conversation with President Xi of China” and that “big progress” is being made on the trade front. We’ve heard similar claims in the past, but equities are grasping at any encouraging news as the worst year for stocks since 2008 winds down.
Offsetting the optimism on trade is the ongoing partial U.S. government shutdown. Both sides have dug in their heels and there seems to be little hope for a compromise on border security any time soon.
Gold set a 6-month high at 1284.08 in overseas trading before slipping back into the range. The yellow metal ended 2017 at 1302.90, which means it is presently a mere 1.6% lower on the year. That’s reflective of a pretty resilient gold market when you consider this was a year that saw four Fed rate hikes and nearly a 4% gain in the dollar.
Gold has nearly achieved the 1286.95 Fibonacci objective (61.8% of the decline from 1365.26 to 1160.27). A short-term breach of this level would further bolster the technical picture in early 2019, favoring an upside extension to the $1300 level. A move above $1300 would put the 1365.26 peak from 11-Apr-18 in play.
Gold is rather overbought as a result of the previous 2-weeks of solid gains. However, dips are likely to be viewed as buying opportunities. Initial supports to watch is found at 1274.27 (Friday’s low) and 1267.15/1266.68 (9-day MA and Thursday’s low).
Silver definitely faired worse than gold this year as the gold/silver ratio reached 25-year highs. While silver finally broke out of its range in the waning days of 2018, it remains set for a more than 8% loss for the year.
Nonetheless, recent price action leaves us encouraged heading into 2019. The large double bottom at 13.95/90 has been confirmed. The 200-day moving average has been convincingly penetrated and the nearly 50% of the decline off the June high to the near-three-year low at 13.90.
Silver has gained more than 11% since that low was established in November. While the market has become overbought, a breach of the 50% retracement level at 15.61 bodes well for additional gains to the $16 zone. Short-term dips should be viewed as buying opportunities ahead of $15.
Perhaps more importantly, the gold/silver ratio has dropped back below 83 for the first time since late October and is presently well below its 100-day moving average. When silver is leading, I always feel better about the overall outlook for the precious metals.
Platinum struggled all year as well, weighed by trade concerns, a supply surplus and weaker demand for diesel automobiles. Platinum looks like its going to close more than 14% lower on the year.
The supply/demand fundamentals seem unlikely to improve in the coming year and the recent consolidation has the appearance of a continuation pattern. Scope remains for a near-term challenge of the post-financial-crisis low at 732.50. The low from this past August at 754.03 provides intervening resistance.
Palladium was the shining star of the precious metals sector in 2018, posting a gain of about 19%. Here strong demand for gasoline and hybrid vehicles along with a persistent supply deficit conspired to push palladium sharply higher.
Recent consolidation served to relieve the overbought condition somewhat and strong demand and a dearth of supply is expected to underpin palladium into the new year. The next upside objectives are 1300 (psychological) and 1329.65 (Fibonacci projection). The all time high at 1282.50 from 19-Dec marks intervening resistance.
Initial support at 1249.50/1248.00 protects the more important 1220.20/1218.00 level. Continue to view setbacks within the well-established uptrend as buying opportunities.
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 Financial Services LLC, unless otherwise expressly noted.
