From a classic technical perspective, the gold market yesterday forged a key reversal with a new low rejected and a higher close and more importantly it has followed up that action with an upward extension this morning. Obviously the inability of the US dollar to hold its probe above 97.00 fostered some renewed optimism toward gold especially with US data soft enough this week to facilitate fresh economic uncertainty.

We also think that the gold market is being lifted this morning because of a lack of definitive progress in the trade talks as there does not appear to be progress with the talks reportedly shifting the talks back to Washington next week. Obviously there were pent-up expectations for progress on both trade and budget this week and it would appear that neither front yielded definitively positive results.

In fact the budget impasse was generally solved but the President is apparently poised to maneuver around the lack of funding by declaring an emergency and the Democrats are promising a legal battle to stop his actions.

It is also possible that the bull camp is seeing a delayed reaction to yet another significant decline in South African gold production. South African gold production in December fell by 31% versus year ago levels and that continues a very long term down trend. Certainly supply has not been a key focus of the trade lately, but declining South African production news was joined by news of a possible labor dispute at a Sibanye-Stillwater mine where they were intending to cut jobs and idle unprofitable shafts.

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