Precious Metals News Update - 12 April 2018

PRECIOUS METALS RANGES: Trade Date: April 11th

COMMENTS / HIGHLIGHTS:

• Safe haven buying on the back of unfolding developments from the Middle East had kept a steady bid tone to the precious metals throughout Asian and European trading as expectations mounted of military action in response to recent alleged events in Syria.  It was an early morning (US) Tweet from US President Trump however, that lit the wick under gold and silver, propelling them towards significant technical resistance levels.

• Continuing the United States’ bellicose rhetoric in response to the as-yet unverified, un-investigated and alleged chemical weapons atrocity in the rebel held town Douma in Syria days ago, the US President Tweeted: “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!” It would be a masterpiece of understatement to say that those words created a certain amount of consternation amongst investors.

• President Trump followed up later with the more conciliatory Tweet, which saw some of the gains from his original Tweet (which remains in place on the social media platform) pared: “Our relationship with Russia is worse now than it has ever been, and that includes the Cold War. There is no reason for this. Russia needs us to help with their economy, something that would be very easy to do, and we need all nations to work together. Stop the arms race?” By then the damage had been done.

• The release of ‘hawkish’ minutes from last month’s Federal Open Market Committee meeting of the US Federal Reserve weighed further through to the close. Specifically: “All participants agreed that the outlook for the economy beyond the current quarter had strengthened in recent months. In addition, all participants expected inflation on a 12-month basis to move up in coming months.” and regarding the so-called “trade-war”, “Participants did not see the steel and aluminum tariffs, by themselves, as likely to have a significant effect on the national economic outlook, but a strong majority of participants viewed the prospect of retaliatory trade actions by other countries, as well as other issues and uncertainties associated with trade policies, as downside risks for the U.S. economy.”

• In % terms, palladium again led the way for the precious metals complex as trade sanctions against the Russian Federation and Tuesday’s news from China of the easing of “trade war” tensions, continued to lend support. The question to be answered now is whether XPD/USD can reclaim the all-important 200 Day moving average (@USD 976.00) thereby locking in a low at USD 897 (April 6th) and mitigating further downside risk?

TECHNICAL COMMENTS:

• XAU/USD: As highlighted yesterday, XAU/USD was testing the upper boundary of a triangular congestion region at USD 1344 and the decisive break (and subsequent close above this level) allowed the market to make its way back unimpeded towards the top end of the broader sideways trading band between USD 1357 – 1367, halting right at resistance at USD 1365. Subject to headline risk surrounding events in Syria, mean-reversion back towards the USD 1344 level is probable and on the topside, gold has now registered a technical ‘double top’ around the USD 1365.00 level (highs of Jan 25th and yesterday), which should now provide a significant inflection point i.e. a further attempt and failure would create a technical ‘triple top’ and open the way to the risk of significant long liquidation / capitulation, whilst a break and close through resistance USD 1365 should portend sustained higher levels ahead.

• XAU/AUD: Much like XAU/USD, XAU/AUD sits in a sideways trading band bounded by the previous resistance at AUD 1715 (which now acts as support) and the March 26th, April 2nd and April 11th highs at AUD 1757.00. The market held support at its 21 Day moving average at AUD 1725.00 yesterday before bouncing higher but mean-reversion back towards there (AUD 1728.50 currently), should not be ruled out (subject to headline risk surrounding events in Syria).

Good luck.
 
Regards,
Andre