Weekly Commodities Wrap

China Data Weakness Weighing on Copper

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Gold: Gold Firm Despite Rising US Rate Hike Expectations

Movement in the price of gold remained fairly muted this week as a lack of directional drivers kept the precious metal hemmed in. The Fed is widely expected to raise rates at its upcoming meeting in December which should keep upside constrained, while simmering geopolitical tensions in the Middle East and between the US and North Korea, have provided a floor of support for the safe haven.

A strong US CPI reading this week, which saw core inflation rising to 1.8% in October from 1.7% prior, has kept rate hike expectations intact and saw gold reversing earlier gains but still positive on the week.

Gold has been stagnant around the 1278.40 level for the last four weeks and remains within the bullish channel which has framed price action since the November 2016 lows. Key support is sitting at the 1260.58 where there is a confluence between the October low and rising bullish channel support.

Silver: Price Remains Stagnant on Lack Of Directional Drivers

Silver prices remained positive this week as a weaker US Dollar kept precious metals and industrial metals alike, supported. Price action continues to be driven by opposing themes of rising US rate hike expectations and geopolitical tensions. Although tensions between the US and North Korea have been out of the spotlight recently they remain below the surface they remain a key market focus and have the potential to create sporadic volatility.

Silver prices have been ranging within a broad contracting triangle pattern which has framed price action over the year. The next key structural support is sitting at the 16.31 level which is the October low.  To the topside, the next key level is the 17.47 level which is the October high. A break above here will bring the top of the contracting triangle into focus.

Copper: China Data Weakness Weighing on Copper

Despite a weaker US Dollar this week, copper prices fell back as the latest data out of China highlighted weakness in the economy with industrial output, fixed asset investment and retail sales undershooting expectations over the last month.  Analysts are forecasting a further cool down as winter approaches in China, which is traditionally a season of weak copper demand.

After surging to fresh 2017 highs a month ago, copper prices have since softened. The broken 2015 swing high at 2.970 remains the key pivot for copper. While price remains above this level focus remains on further upside. The next key objective will be the mid-2014 swing high around 3.273.

Iron: Chinese Steel Cuts Weighing on Price

Iron ore price fell lower this week as Chinese steel markets contracted further in response to the start of production cuts, in line with the government’s crackdown on air pollution and illegal smelting operations. Port inventories are rising as demand is reducing with latest reports showing that of the six main iron ore ports in China, only one has spare capacity.

After recovering to $64 level, iron ore has since turned lower again with this level proving to be firm resistance. While below this level, focus remains on further downside with the year to date low the next key level to watch. Only a break back above the $64 level will alleviate near-term bearishness.


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