The yellow metal rose slightly this week, taking its cues from a weakened US Dollar which fell in response to the June FOMC meeting. The sell-off came despite the Fed raising rates as expected and upgrading its rate hike forecast for the rest of the year from one hike previously to two hikes. The weakness is reportedly due to President Trump preparing to apply tariffs to billions of dollars of Chinese goods as early as Friday, raising concerns about the potential impact on the US economy. The concerns have raised safe haven demand for gold which is often used by investors to protect capital during times of economic uncertainty.
Gold prices are still sitting on the 1296.65 level support which has been an important level in the market over the last year. If this level holds, focus will be on a further rotation higher with the 2016 high of 1376.20 the main objective. A break of the support however will open the way for a deeper move lower.
Silver prices tracked the moves seen in gold this week, actually rising at a faster pace in response to the weakened US Dollar. Silver is also being supported by global supply concerns as well as lower LME inventories which have combined to fuel the positive moves this week.
After spending most of the last two years in a large contracting triangle pattern, silver prices have since moved into an even smaller structure, highlighting the lack of momentum and volatility in the market. For now the 17.45 – 15.80s range continues to play out and until either side is broken, the stagnation continues.
Despite the positive moves seen elsewhere in the commodities complex, copper prices fell lower this week after surging to fresh 2018 highs last week. The sell-off has been attributed to speculative position squaring due to the risk events over the week. Especially in light of Trump’s planned tariffs on China which are likely to hit the manufacturing sector, lowering demand for the metal.
Further downward pressure was added by news of progress in the negotiations underway at the Chilean Escondida mines, where workers from BHP Billiton have been in dispute. After suffering several strikes last year, which weighed on supply, supporting price, speculators have been covering positions on news of the positive developments within the negotiations.
The rally in copper over the last few weeks has seen renewed upside focus with price currently challenging the 2017 high around 3.278. If the bullish channel running from mid 2017 lows continues, focus will be on a test of the next major resistance level around the 2014 high of 3.469.
After suffering heavy declines in recent weeks, Iron ore prices roared higher this week supported by strength in Chinese steel markets. The moves comes on the back of an announcement by China’s premier steel making companies; Baoshan Iron and Steel and Wuhan Iron and Steel Corporation, who said that they will raise the prices of some of their hot-rolled coil, beam and steel wire products for July delivery. This announcement caused a spike in steel prices which trickled down into the iron market, which looks set to continue.
The rally in iron ore has seen price trading back up to retest the underside of the broken bullish trend line from summer 2017 lows. Price has been fighting it out around this trend line for a few months now and is yet to make a meaningful directional break. For now the key levels to watch are the $69 highs and the $63 lows which will need to be breached to support a fuller move.