Weekly Commodities Wrap

Metals Rally On China Rate Cut

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Gold

Despite slightly higher US yields, gold prices were higher this week as on-going trade tensions between the US and China have kept the US Dollar penned in. Markets had been hopeful of calmer trading given the Chinese President Xi’s recent speech at the Bao forum, in which he said that the country would be more open regarding trade policies and reduce some of the tariffs on cars and some other goods.

However, an article published by the Wall Street Journal has fuelled concerns that the US is planning to add further tariffs to Chinese imports reporting that Trump has viewed Chinese concessions as a sign of weakness and an opportunity to increase pressure on the world’s second largest economy.

While on going trade disputes between the US and China have fuelled a deterioration in risk sentiment over recent weeks, there are some positive developments. Speaking midweek, Trump said that he is hopeful that an upcoming, unprecedented summit with North Korean leader Kim Jon Ung would be successful following a recent visit to the country by the CIA.

Metals Rally On China Rate Cut 1

Gold prices remain trapped just under the resistance trend line of the broad contracting triangle pattern, which has framed price action over the last two years. Price continues to consolidate just under the pattern top suggesting that an upside break is still on the cards.

Silver

As the metals rally on China rate cut, in a break of the typical trading correlation between the two, silver prices far outstripped the moves in gold this week. Silver rallys firmly as risk sentiment recovered in response to Trump’s comments regarding a summit with the North Korean leader.

Metals Rally On China Rate Cut 2

Silver prices made a strong break above recent consolidation this week and are now fast approaching key resistance at the resistance trend line of the large contracting triangle pattern along with structural resistance around 17.45 which if broken brings  the 18.20s level into focus.

 

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Copper: Market Shrugs Off Trade Wars

Copper prices were firmly higher this week as risk sentiment recovered strongly across the board in response to news of the latest China reserve rate cut which has boosted expectations of increased economic activity. Adding further demand was news of a potential summit between the US and North Korean leaders, which would be unprecedented.

The news comes as a big boost for market which have been weighed down under the pressure of US / China trade disputes over recent weeks. With the copper deficit having widened over 2017 many analysts are expecting copper to remain in demand over 2018, forecasting higher prices despite the ongoing Fed tightening cycle.

Metals Rally On China Rate Cut 3

For now, copper prices are challenging the broken rising channel support from below. If price can make its way back above that trend line focus will be on a move back up to the 2018 high around 3.275. A break of this level will bring deeper structural support around 2.771, the mid 2017 high back into focus.

Iron: Price Rallies on China Rate Cut

Iron followed the trend as metals rally on China rate cut which has boosted expectations of demand for steel and iron. Adding further support this week was the news that BHP Billiton, the world’s biggest iron producer, has cut its production forecasts to between 239  and 243 million tonnes from 272 and 272 million tonnes due to the disruption from a cyclone in Australia.

Metals Rally On China Rate Cut 4

Iron ore prices are now sitting on the rising trend line from 2015 lows where momentum has stalled. If price can remain above the trend line focus will be on another rotation higher while a break of the rising trend line will bring the June 2017 lows into focus around 54.52.

 

 

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