Gold: Hawkish Fed Expecations Weighing on Gold
Over a week of relatively quiet trading, the yellow metal softened slightly as the US Dollar and US equities strengthened. Earlier in the week UC CPI printed in line with expectations rising 0.2% in February which kept the US Dollar supported and saw diminished demand for gold.
Traders have been upping their expectations that the Fed will be forced to raise rates at a quicker pace than is currently forecast due to rising prices pressures and a strong synchronised uptick in global growth. While February’s CPI print hasn’t particularly exacerbated this view, it does keep this perspective intact and further USD demand is likely to emerge as we head into the Fed’s next meeting. Alongside this the recovery in global equities has seen weakened safe haven demand for gold which has added to the selling pressure in the yellow metal.
Gold prices remain confined within the large contracting triangle which has framed price action over the last two years. For now, price remains above key local support at the 1296.65 level where there is also rising trend line support. A break of this level will open up the way to 1196.52 which is the next big support level.
Silver: Stronger US Dollar Weighs
Silver prices tracked the moves in gold this week, sliding lower over the course of trading as the US Dollar and US equities moved higher. The upcoming March FOMC is likely to put further pressure on silver prices as the Fed is widely expected to raise rates in line with recent commentary and strengthening economic data.
Silver prices are currently clinging to the rising trend line of the contracting triangle pattern which has framed price action over the last year. A break of this trend line will put focus on a test of deeper structural support at the 15.65 – 15.80.
Copper: Better China Data Provides A Boost
While slightly negative on the week copper prices were able to claw back some of the week’s initial losses as stronger data out of China saw some mid-week buying kick in. Chinese industrial production was shown to have grown 7.2% year-over-year in January and February, up sharply from the 6.2% rise seen in December and well above the 6.1% forecast.
There had been concerns for demand in China due to recent data weakness though this was likely due to the Chinese New Year. Strong industrial production data is a good sign for copper bulls. Furthermore, head of Antofagasta, one of the largest global producers of copper, forecasts stronger copper prices over the year to come due to a combination of strong demand from the electric automobile sector and a shortage in large-scale mining projects.
Copper price remain trapped in a range between rising trend line support and the year to date high around the 3.273 level. To the downside, the next key support level is the broken mid 2017 high around 2.762 which should see longer term buyers stepping in if retested.
Iron ore: Recovery In Steel Prices Providing Support
Following a sharp sell-off over the prior week, iron ore staged a recovery this week despite the stronger US Dollar due to better than expected Chinese economic data. Adding further support for iron this week was the rally in steel prices which have begun strengthening again due to a boost in fixed asset investment.
Iron ore prices are now turning higher again and are fast approaching key resistance at the $73 level which is the broken January swing low. A break back above this level will put focus on a further run at the key $80 level.