Summary:
- More weakness seen in precious metals
- Gold and Platinum makes new 2018 lows; Silver not far behind
- US housing starts miss; building permits inline
There’s been more downside seen in the precious metals today, with Gold falling to its lowest level of the year. Yesterday we pointed out that Gold had taken out key support around 1301 following the release of US retail sales and after an uncharacteristically quiet year so far, there could be a significant breakout in play. Taking a fib retracement from the low seen last December to the highs in January gives levels that may be worth keeping an eye on with the market now testing the 61.8% fib after breaking the 50% fib at 1301. Another move lower would see this broken and pave the way for the 78.6% at 1264 and even possibly the 100% fib at 1236 to be tested going forward. Bulls will want to see a close back above the 50% fib at 1301 before they can hope to make a sustained push higher.
Gold is now testing the 61.8% fib at 1285 after breaking decisively through the 50% at 1301 yesterday. Source: xStation
If the sell-off in recent sessions in Gold looks large, it is relatively small compared to the move seen in Platinum which has also plunged to its lowest level of the year today and declined almost 5% since Friday. One of the common factors that is weighing on precious metals is the rise in US yields with the 10-year (TNote on xStation) hitting its highest level since 2011 yesterday. The rise in yield can be seen be looking at the Tnote with the market trading inversely to yields; IE lower Tnote = higher yields. Going back to the start of the year the Tnote has been in a sustained downtrend and it appears to be leading Platinum lower. A divergence is apparent at the moment and this could suggest further downside for Platinum if the markets are to converge once more – taking Tnotes at their current level.
Platinum appears to be following the Tnote lower with the latter leading the way down for much of the year. Source: xStation
In terms of data releases this afternoon from the US it’s a pretty quiet affair with some housing data the standout. Housing starts for April fell a little more than expected, coming at at 1.29M from 1.34m prior against a consensus forecast of 1.32M. At the same time we also got the latest building permits numbers, with came in as expected at 1.35M, down form 1.38M last time out. Overall these metrics remains around there recent average of the last couple of years and whilst they aren’t stellar they don’t really seem to indicate any potential issues for the time being. Along these lines the market reaction has unsurprisingly been negligible since the data dropped.
US housing starts and building permits both remain near there recent average. Source: XTB Macrobond