Although minor, gold prices managed to post a second consecutive positive week, gaining ground as the US Dollar softened. Once again, trade tensions have come into focus, weighing on the US Dollar as the market heads toward the deadline of the US import tariffs on EU steel and aluminium. The EU has until the close of play today to stop President Trump for increasing tariffs on EU steel and aluminium exports to the US by agreeing to a voluntary limit on exports which the President will repay with an unconditional and permanent exclusion from US tariffs.
Alongside weighing on the US Dollar, the threat of further US induced trade tensions has created safe haven demand for gold which was already seeing a flight to quality this week as the market responds to the ongoing political uncertainty in Europe as Sergio Mattarella seeks to impose a technocratic government and avoid going to snap elections in August. The market is fearful of the anti-EU parties gaining power which would undermine the unity of the EU and likely cause economic damage due to loss of investor confidence.
Gold prices are sitting just above the key 1296.65 level (key pivot over 2017) from below. If this level holds as resistance, further declines are likely, with the 119.52 level the next major support zone. For now, retracement lower can be viewed as a pull-back within the short term bullish trend of recent months, keeping focus on further upside.
Silver prices, which have now hardly become worth commenting on, also posted a positive week, though remain firmly trapped within the recent range which has persisted now for several months. The market is struggling to build a directional view amid opposing market forces.
For now, the main levels are the boundaries of the 15.60s – 18.20s range which have yet to be breached over the year. Until either side is broken, the stagnation continues, offering little outside of intra day trading.
The red metal fell lower this week as concerns over the US / China trade war continue to weigh on investment sentiment. Beijing warned the market on Wednesday that it is ready and willing to retaliate if Washington contuse to press ahead with planned trade tariffs which Beijing deems a “trade war”. These comments come on the back of the US announcement this week that it plans to continue with the proposed $50billion worth of trade tariffs. Rhetoric between the two sides had previously calmed down following initial tension and so the market is disappointed to see the renewed uptick in hostility between the two economic superpowers.
Copper is still sitting in the middle of the 2.966 – 3.276 range that has persisted over the year so far. A break of the 2.966 (broken 2015 high) paves the way for a deeper run down to the mid 2017 2.763 high level which is the next main support.
Iron ore prices tracked the moves seen in the broader commodity complex this week, tracking higher as the US Dollar weakened over the session. The strength in iron prices this week came on the back of renewed strength in the Chinese steel prices which have been rallying again despite concerns regarding a US / China trade war.
After breaking down below the recent swing low, iron ore prices turned back up toward the $67 mark this week. For now price action still looks to be in a corrective pattern against the broad decline seen from the $79 high and until price breaks back above $70, focus remains on further downside.