Gold leads precious metals higher as viewers can’t stop watching The House Of Trump on Capitol Hill, and selling dollars.
I can’t help but feel a little sorry for Netflix). I was an avid follower of the House of Cards series, but this year I just sort of lost interest. Indeed, the showrunners there must be scratching their heads wondering how they got it so wrong. As a member of the FANG club of tech stocks they must be worried about becoming defanged by real life in Washington D.C. which seems to become more surreal than the TV series. Perhaps that’s why I have drifted away as well.
There is no doubt though that the market has started letting their feet do the talking with a mass exodus out of the US dollar and toward the exit door. To be fair to President Trump, this is not entirely of his making, and perhaps a Marine Corps General is the man to bring order to the chaos. Capitol Hill must take a fair share of the blame as well. With Republican control of both houses, they seemed to have achieved an inability to share the toys in any matter at all.
The net result has been a mass unwind of the Trumpflation premium from post election halcyon days. To give further balance, the Federal Reserve has played a part as well. They appear to be in the process of “blinking” rather poorly on the rate hike front which is also undermining the dollar as an increasing procession of central bankers globally start playing the hawkish tune.
More interestingly, in a world with some seriously intensifying geopolitical tensions, the safe haven of all safe havens, the US dollar, appears to have missed the boat. As a spotty youth some 30 years ago, one of the first lessons my grizzled chief dealer drummed into me was “always buy dollars on a war, or even a hint of one.” This experience seems to have been consigned to the history bin, and today it appears the cryptocurrencies and precious metals have taken up the mantle with both product sets racing higher in the last couple of months.
Maybe I'm showing my age, but cryptocurrencies I will leave alone. However, in an emergency I do like the feeling of holding a gold bar in my hand, as a store of value. With cryptocurrencies I would always be worried some pasty hacker sitting in a room in Eastern Europe surrounded by pizza boxes could steal my holdings.
This all brings us to precious metals and just how precious they have been. All four are now forming bullish technical pictures to some degree.
Gold
Overnight, gold consolidated in a six dollar range, but remains at near two-month highs along with silver and platinum. The unvirtuous circle of turmoil and disappointment with Washington D.C. feeding into a weaker US dollar continues to help precious metals shine. To this, we can add US/Russia relations, North Korea, Venezuela and the revolving door at the White House, all of which will also be supportive of gold as a safe haven.
In the short-term, gold has formed a double top on the daily charts at 1271.00, the Friday and Monday high. It seems to be posing a technical barrier to gold having topped there again in the Asian session. A daily close above this level though could open the path for a march upon the May highs at 1281.50.
Initial support resides at 1265.50, but the key support for gold remains the 100-day moving average, today lying at 1251.00. From a technical perspective, only a daily close below here would call into doubt the bullish chart picture.
Silver
Silver has consistently moved higher with gold but perhaps not with quite the same venom. I suspect that liquidity has played its part here with traders preferring the much more liquid gold markets. Traders will know that the entry and exit doors are much smaller on silver especially when the herd stampedes towards them.
Nevertheless, as the chart below shows, silver has consistently moved higher and held its medium term support line on any and all pullbacks through July. This level sits at 16.6550 today with 16.5000 the next support behind.
Silver has some interim resistance at 16.9100, some 10 cents away from its present 16.81000 level. It is, however, within shouting distance of a rather formidable technical resistance zone between 17.0650 and 17.1300 where the 100 and 200-day moving averages reside. A daily close above this zone would could suggest a test of the June highs at 17.5650 could be on the cards.
Platinum
Platinum’s price action is less stellar, and I am at a loss, in all honesty, to explain why. It could be that traders have had their fingers burned here previously, following platinum’s aggressive fall from grace in H2 2016 when it dropped from 1195 to 889.50. It did, however, hold long term support at 889.40 on its corrective drop in early July and has muddled its way higher since.
In the process, it has broken the longer term triangle to the upside although it has made heavy work of it. The descending trend line is now at 927.00 and forms the first major support for Platinum.
It has also broken through its 100-day moving average at 939.35 in a positive technical sign. The next major resistance is the 200-day moving average at 951.45 followed by the 968.00 regions.
Time will tell if this move signals a longer term trend or if, after the dust settles, we are still in a longer term 889.00 to 1040.00 range.
Summary
Precious metals, in general, have rallied well as the market has deserted the US dollar. None of them is overbought on their daily RSI’s either, suggesting the up moves may not have run out of steam yet. The bullishness of the price action is variable, however, with gold the clear winner and silver a distant second and platinum being lapped. The trend is your friend as they say, and it may well be that traders prefer to follow it in the much more liquid gold market.