As the US Dollar Weighs on Metals, Gold prices came under pressure following the US Dollar’s impressive rally last week. The US Dollar had been under pressure due to mounting concerns over the trade war with China as Trump threatened to increase tariffs on Chinese goods to $150 billion. However, with the more aggressive rhetoric having now died down, the market has been breathing a sigh of relief, which has seen equities rising off lows plumbed earlier in the week. Added to this is the news that there has been progress in the North American Free Trade Agreement negotiations between the US, Canada and Mexico.
The decline in geopolitical risks has turned traders’ attention back to the fundamental picture in the US and with the domestic economy improving, US treasury yields have been rising with US10Y yields hitting 3% again for the first time in four years. For now gold remains caught between conflicting forces with ongoing geopolitical tensions presenting an upward force due to safe haven demand and higher US rates causing selling pressure as traders move money back into the US Dollar.
After recently testing the resistance trend line of the broad contracting triangle which has framed price action over the last year, gold has once again turned lower and is now testing the rising trend line of that pattern. If price breaks the trend line traders will turn to deeper structural support at the 1296.65 level
Silver prices tracked the moves seen in gold this week moving lower, as the US dollar weighs on metals following higher US rates. Up until the rally seen last week, silver prices have been frustratingly stagnant over recent months as the market has struggled to build a directional view of any conviction.
The sell-off in silver this week took price back below the contracting triangle pattern which has framed price action over the last two years. While below this structure, focus turns to another test of the 15.65- 15.80 level which has been a major support level in the market.
The red metal conceded the gains won last week and traded lower over the course of trading due to the stronger US Dollar and profit taking on the back of last week’s rally. Those in the metals industry have also noted weaker global demand for copper recently due to a decline in consumption by physical industries. However, many analysts still forecast higher prices for copper. Encouraging this view was the news this week, reported by Chilean iron miner Antofagasta that its overall copper production was down 10% on the first quarter, largely due to lower quality ores. With the copper deficit having widened once again over 2017, any further drop in production is likely to fuel higher prices in the long run.
Copper prices are still battling it out at the retest of the broken bullish channel support from late 2016 lows. After rallying back up to test the broken trend line last week, copper has since fallen back again. While above the 2.968 level ( broken 2015 high) focus remains on further upside with the 2018 high around 3.278 the main objective.
The US dollar weighs on metals all round this week, with Iron prices tumbling once again also. After hitting a one month high last week Iron price have now fallen by over 3%. These losses came despite higher steel prices which hit a seven week high this week as the USD rally remained the main story.
After rebounding strongly to trade back up above the broken rising trend line, Iron failed around the $69 mark and has since come off a bit. However, while above the rising trend line focus remains on a further run higher.