After suffering consecutive weeks of declines over the last month, the yellow metal was able to rebound higher this week as safe haven inflows saw steady demand. With the market bracing for the implementation of bilateral US/ Chinese tariffs on Friday which is set to affect billions of dollar’s worth of each country’s goods, there has been some softening in risk sentiment. Up to now, the market has chosen to shrug off any concerns and has instead been focused on the US rates story with USD rising in response to the Fed hiking rates and upgrading its rates forecast to two further hikes this year. However, with the official implementation of the tariffs imminent, it seems that now is the time for some long covering in USD and some safety buying in gold.
The bounce in gold this week came from the area of technical support that we highlighted last time around where we had confluence between the corrective symmetry swing at the 1244.13 level and the December 2017 low at the 1235.95 level. If we see some further upside from here we can look to the 1295.65 level (which was a key level over last year) to act as first resistance.
The story in in silver this week was similar though buying occurred at initial lows on the week helping silver just come back above even on the week. Though silver typically tracks the move we see in gold, investors prefer to use the yellow metal as a safe haven with silver seeing less inflows due to economic uncertainty.
After breaking down through the recent contracting triangle pattern which has framed price action over the year, silver found support at the 15.80 region noted last week. This has been a huge level in silver over the last few years and the bounce here suggests that we might be in for some further range rotation frustratingly so for momentum players.
As concerns mount of the economic impact of the US / China trade war it seems that copper is bearing the brunt of this uncertainty, printing its fourth consecutive negative week. As the world’s largest consumer of copper, a dip in manufacturing linked to less global demand for Chinese products, could spell bad news for copper producers, hence the fall in price. Typically, copper has acted as a good barometer for the market’s view on the health of the economy, so this sharp sell off in the red metal is a strong indication of the level of concern which is being jumped on by speculators keen to profit from the drop in price, further exacerbating the decline.
The fall in copper this week has seen price finally breaking below the 2.964 level 2015 high with the level, which underpinned price action over the last year, now likely to act as resistance if tested from below. To the downside, the next big level will be the 2.762 level which was the mid 2017 high and has gone untested since being broken. This could be a level where we see some initial profit taking kick in, though for now, focus is firmly on further downside.
Iron ore prices continued their fall lower this week, though not nearly as strongly as the moves seen in copper. Indeed, moves in iron markets this week have been incredibly limited with some commenting that the action is around the same level of that usually seen during Chinese public holidays.
Iron ore continues to inch its way closer to the key $64 level support which is an important level for the market. A break here could usher in momentum players and herald the next leg lower while a further rotation higher from this level should keep the current $64 – $69 range in play.