December gold futures finished the week losing $12.70 cents to close at 1284.8. Silvers losses were more pronounced as the December contract lost 30 cents for the week to close at 1667.5. Both precious metals have been reeling since making yearly highs on September 8th. Gold has given back over $80.00 in value while silver has lost a whopping $1.61. If one examines the chief reasons for the (July -Sep) rally, one should not be surprised for the major pullback that has occurred in the last three weeks. Seasonal buying that usually occurs during mid July- September time frame was the first reason for this years gold rally. Second, was weakness in the greenback which took the Dollar to multi-year lows provided investors to then use gold and silver as an anti dollar hedge amid perceived dovish outlooks for short-term interest rates by the Federal Reserve. Third geopolitical chaos regarding the Trump administration in Washington along with continued nuclear threats from North Korea that made it seem to some that armed conflict and potentially nuclear war was inevitable with the rogue regime. In short it was the perfect storm for a bull market in gold and silver. Once new highs for the year were made for both metals, the public jumped in increasing the speculative long position in both markets Long positions in gold almost surpassed 300 thousand contracts in early September longs while long positions is silver totaled just shy of 100 K contracts. As daily and weekly charts showed over bought technical condition, shorts emerged and profit taking ensued in the precious metals heading into the two-day meeting of the Fed on 9/19-9/20. The FOMC decision itself offered no surprises but commentary from the Fed Chair was more hawkish than previously thought. The Fed put a December rate hike back on the table and signaled that three rate hikes may be in store next year. This has spurred the Dollar higher while at the same time seasonal buying in both gold and silver has ebbed for now. North Korean fears have taken a back seat this week to the administrations calls for revisions to the tax code and therefore is top step in the news cycle. Having said all of this equities continue to push higher as the S&P and Dow have pushed to all time highs this month. The risk on trade is alive and well as investors continue to buy dips eschewing metals in the interim. As mentioned in last weeks report, gold traded down to the fifty percent retracement target this week at 1283.4 while silver achieved the same at 16.77.
Due to the enormity of job data next week, I look for gold to bottom here and hold above key moving averages. The 100 day sits at 1272.8 and the 200 day at 1247.4. Technical’s for next week comes in as follows. Support comes in at 1270.7 and with a close under 1257.0 is next. Resistance is up at 1307.4 and then up at 1330.6. For December silver , support is down first at 1645.5 and below there at 1623.5. Resistance is up at 1709.5 and above there at 1751.5.
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