Gold edged higher on Friday, reversing earlier losses after the Catalonian parliament’s independence declaration from Spain led investors to seek safety from political upheaval. Catalonia’s declaration was in defiance of the Madrid government, which was preparing to impose direct rule over the region. Gold had earlier dropped to a three-week low of $1,263.35, said Reuters
They explained that The Nasdaq Composite had its best day in nearly a year on Friday, boosted by strong corporate earnings, while the euro posted its worst week of 2017 after the European Central Bank decided to prolong its bond buying to keep interest rates low. The U.S. economy grew at a 3.0 per cent annual rate from July to September, showing resilience even as recent storms hurt consumer spending. The euro marked its biggest weekly loss of the year following the Catalan independence vote and the ECB’s decision on Thursday to extend its bond purchases into September 2018 while reducing its monthly purchases by half to 30 billion euros starting in January. The stronger-than-expected U.S. third-quarter GDP data helped bolster the dollar. So where does this leave the precious metals? RAKBANK explain…
Gold spent the early part of the week treading water around $1280 in a muted response by the major physical buyers in Asia to the previous week’s (almost) 2% with the yellow metal posting a high of $1283.50 on Tuesday before making the expected test of the 100 day moving average set at $1275. Resilient US GDP data on Friday, with its bullish implications for interest rates and the USD saw gold plunge through this key long-term support with the price falling to a low of $1263.75 before a significant deterioration in the Catalonia geopolitical situation prompted pre-weekend safe haven buying that helped gold to recover to $1272.50 bid by the close, representing a pared loss of $7.75 or 0.61% on the week. Looking ahead gold looks technical vulnerable on the downside following last week’s break and close below the 100 day MA and chart watchers will now have the 200 day MA pegged at $1260 in their sights. However global markets will also be focussed on a raft of economic data from the US in the coming five days with the latest employment numbers due out on Friday being the ‘economic elephant in the room’ for Fed watchers, while problems in Spain remain a threat to stability in the Eurozone.
Silver initially staged a smart rebound from the previous week’s 2% decline to post a high of $17.14 on Tuesday however this mini rally was halted by resistance from the 200 day moving average set at $17.16 and the industrial metal fell sharply to a low of $16.60 on Friday after the latest US GDP data showed a solid 3% growth rate in Q3. A late short covering rally into the close saw the industrial precious metal end with a pared 18 cents or 1.06% loss at $16.81, just below the 100 day MA set at $16.82. With gold seemingly vulnerable to further weakness next week silver seems set to confirm the break below this long term support, which would target the band of technical support in place between $16.25 and $16.00.
Platinum had a fairly non-descript week with the price ranging narrowly between a high of $930 on Tuesday and $912 on Friday before ending another disappointing week down $5 or 0.54% at $915 bid. As we pointed out last week the noble metal has been ‘bottom of the class’ this year and it is difficult to see this changing through the remainder of 2017 with chart watchers eyeing an early test of the band of key long term support in place between $900 and $890 while the 100 day MA at $941 and 200 day MA at $951 provides a stiff overhead area of resistance that should now cap rallies.
For once palladium following the same price direction as the rest of the precious metals sector with the price falling from an early high of $975 posted on Monday to a low for the week of $955 on Wednesday before ending exactly in mid-range at $965 bid, a loss $10 or 1.03% on the week. Despite this modest set back the junior precious metal remains the world’s best performing major asset with a 42% gain for the year to date and with short-term lease rates of 8% p.a. reflecting the chronic shortage of supply versus demand palladium seems likely to reclaim a foothold above $1,000 before year end while any unexpected weakness in prices will find strong technical support at $900.