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  • Commodity markets were closed on Monday.
  • Gold ended the day modestly lower while the U.S. dollar stays on top.

Spot gold is leading the way lower with a test below the psychological $1,300 level once again. At the time of writing, spot is trading at $1,298.00 with a low of $1,296.85/oz from the early US hours on Monday.  

Gold has traded in a sideways drift with thin markets due to the US’s Memorial Day holiday and Spring Break in the UK. The political angst in Europe and uncertainties related to the US and trade relations with China supports the case for the upside in the safe haven metal, but the dollar is trading within a firmly placed bullish correction and keeps a lid on recovery attempts  in gold. at the same time, the N.Korean/US summit i an additional uncertainty to keep the bears at bay.  

Political angst to support the upside

For European plotics,  The Italian President, Sergio Mattarella, is now facing impeachment after he vetoed a choice for finance minister, saying that there are too many risks for investors due to the worsened spread between Italian and German 10-year government bond yields, (a key measure of risk). This has cut a bid by Italy’s two populist parties to form a coalition. Parliament could demand the president step down based on a simple majority vote. If the vote is in favour, the country’s constitutional court will decide whether to impeach or not. And then there is  Spanish politics.

Spain  is on the brink when it comes to the possibility of elections after a no-confidence has motion rocked the Madrid establishment, potentially, pulling the eurozone into a fresh crisis.  Mr Rajoy, the Prime Minister, has warned that the political instability will kick up a storm in Spain’s fragile economic recovery following claims over illegal payments from a slush fund run by the Popular Party’s ex-treasurer, Luis Barcenas.

As far N.Korea goes,  The Wall Street Journal has reported that the U.S. decided to hold off on implementing major new sanctions push against North Korea while it looks to revive a summit between President Donald Trump and North Korean leader Kim Jong Un next month. The WSJ went on to explain that “the White House was prepared to announce the ramped-up sanctions regime as soon as Tuesday but decided Monday to indefinitely delay the measures while talks with North Korea proceed, a U.S. official said, citing progress in efforts to repair diplomatic relations between Washington and Pyongyang.”

Gold levels

The yellow metal has been  consolidating in the proximity of the 50-W SMA at $1,298 with eyes to the 100-W SMA at 1277. However, Gold remains  fragile within the bearish trend as RSI leans  neutral on the weeklies. On the flip side, bulls need to get above the 200-D SMA ahead of the 100-D SMA that guards a reversal to the key $1,360 level and a move above these converging MAs would be positive. The 100-W SMA is a key downside target at 1277.