Gold News Update - 17 August 2018

PRECIOUS METALS RANGES - Trade Date: August 16th

COMMENTS / HIGHLIGHTS:

• Precious metals were bludgeoned lower in a wild Far Eastern session yesterday as carnage ensued on global financial markets, in part driven by fears surrounding the potential for contagion from the Turkish bond and currency market implosions of recent weeks. By the close of trading in the US however, the entirety of the day’s losses across the precious metals complex had been recouped, rewarding those investors who were brave enough to step in and buy “where angels feared to tread” and giving the entire day’s price action the look and feel of “exhaustion / capitulation” type selling.

• Throughout the week, the ramping up of pressure in the trade / sanctions war being waged against China and Turkey by the Trump Administration, had driven fears of weaker global economic growth and contagion which consequently saw investors stampede to the sanctuary of the world’s reserve currency - the Greenback, trampling already fragile commodities’ markets underfoot.

• Respite and a relatively colossal intraday bounce was triggered by news that China intends to send a low-level delegation to the US at the end of August for trade talks, as well as a rebound in the beleaguered Turkish Lira.

TECHNICAL COMMENTS:

• XAU/USD:  Last week’s somewhat cautious tone noting: “From a technical perspective, it is far too early to sound a clarion call signalling the end to downside price action”, with the benefit of hindsight has proven warranted. The region between the psychological ‘big figure’ at USD 1200.00 & the 10th July 2017 low at USD 1204.50 was always going to be critical in terms of support and once this gave way on Monday, the 10th March 2017 low at USD 1195.00 and levels down to yesterday’s low at USD 1160.00 (the lowest level since January 4th 2017) were tested quickly as XAU/USD fell into an open elevator shaft. Whilst XAU/USD posted a solid rebound out of yesterday’s low (registering a long-legged Doji candlestick) and it is possible that further advances back to previous support (now resistance) at USD 1195.00 can’t be dismissed, equally probable at this point, is further downside price action - with little by way of technical support until the mid-December 2016 lows at USD 1125.00. One factor which may mitigate this downside risk is the considerable level of speculative short positioning, with everyone seemingly now on the “same side of the boat” in terms of being short, and at risk of being tipped overboard.

• XAU/AUD: XAU/AUD flattered to deceive last Friday, having regained the AUD 1651.25 level highlighted in last week’s commentary and seemingly confirming the previous day’s ‘bullish engulfing’ candlestick, only to roll over and turn up its toes like a shot bird on Monday - ‘reversing the reversal’ as it were. From there, XAU/AUD proceeded to plunge beneath critical technical support at the AUD 1632.00 level on Wednesday, en-route to the 19th October 2017 low at AUD 1625.00 and continuing yesterday to the cluster of lows at the AUD 1615.00 level registered on 25/08/17, 21/09/17 and 04/10/17 - which proved ephemeral as an area of technical support. That said, XAU/AUD did not close beneath AUD 1615.00 and given the significant ‘long-legged Doji’ candlestick, if the market can hold and consolidate above AUD 1615.00 then there is every chance that yesterday’s push down to AUD 1605.00 was capitulation / exhaustion selling and an interim low may have been seen. Previous supports at AUD 1625 and 1632 will now act as resistance beyond which lie topside mean-reversion targets in the AUD 1645 / 1650 zone.

• XPT/USD & XPD/USD: Platinum traded to its lowest level since the last week of October 2008, registering a low at USD 755.50! One time the Cinderella of the precious metals complex, now the ugliest of the ugly sisters. Price action in palladium meanwhile, saw maximum casualties inflicted on both sides of the market as Wednesday’s drop to its lowest level since July 11th last year was entirely reversed by the close of business on Thursday.

Of course, it’s been king (kong) Dollar that has largely driven the moves across the precious metals complex and as can be seen from the attached US Dollar Index chart, since clearing a pocket of resistance just beneath 96.00, it now appears another topside ‘breakout’ is underway which does not rule out a ‘V-shaped’ recovery back to the highs seen in late 2016 - shortly after the election of US President, Donald Trump.
 
Good luck and have a great weekend.
 
Regards,
Andre