Gold
Precious metals begin the week under offer as gains in benchmark equities indices have seen reduced safe haven inflows. Optimism around the prospect of a US-Sino trade deal is keeping investor risk appetite well supported at the start of the new week. Over the weekend, negotiators held further talks in lieu of signing a deal. With a deal now expected to be completed this month, US equities have been trading into record highs. As a result of improved sentiment, the outlook for gold has turned more bearish.
The rise of the US dollar over recent weeks has also started to lean on gold at its last meeting, the Fed noted that it would likely remain on hold over the near term while it waits to assess the impact of its recent rate cuts. With recent US data surprising to the upside, expectations of a US rate cut in December have been obliterated, seeing USD trading firmly higher. Last week, US CPI was shown to have risen at its fastest pace in seven months over October. Coming on the back of a stronger than expected October employment report and a better than expected ISM non-manufacturing number, the US economy appears to be recovering from the lows marked over the summer.
Speaking last week, Fed chairman Powell noted a healthier outlook for the US economy, again weighing on US rate cut expectations. With a US-Sino trade deal on the table, the likelihood is that safe haven flows will further reduce in the near term, keeping metals anchored to the downside. The uptick in CPI is an important development, especially since oil prices have remained week over recent months meaning that the upward price pressure has been domestic rather than a source of external factors. At 1.7%, CPI is still just below the Fed’s 2% target though are on course to move back into the target region over the coming months.
Silver
Silver prices have been under pressure at the start of the week also, in line with the movement seen in gold. This week, the FOMC minutes are likely to create further upside pressure in USD given the Fed’s decision to remain on hold in the near term. The market will be eager to learn of the discussion around the last rate cut with upside USD risks clearly noted.
Technical & Trade Views
XAUUSD (Bearish, below 1474.70)
XAUUSD From a technical and trade perspective. With longer-term VWAP negative, the near term bias remains bearish for gold. Price has retested the broken monthly pivot which is holding as resistance for now. While gold remains below the monthly S1 at 1474.70 the outlook is bearish, with a further drop down to the 1375 level (Yearly R1 retest) seen in the near term.
XAGUSD (Bearish, below 17.1753)
XAGUSD From a technical and trade perspective. Silver prices are holding below the broken monthly S1 at 17.2194, keeping the near term outlook bearish. In terms of next levels, the yearly pivot at 15.6951 could see some interim bids, though, while price stays below the 17.1753 level, lower prices are likely.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!