Weekly Commodities Wrap
Hopes Of Trade Resolution Between US & EU Fuel Relief Rally In Copper & Iron
Gold prices extended their declines this week having printed just one positive weekly session out of the last seventh as the US Dollar rally continues to build. The market took its cues this week from a lacklustre ECB meeting which saw the ECB reaffirming its commitment to winding down QE this year while keeping rate son hold through summer 2019. However, with data continue to highlight weakness, there is growing speculation that QE might end up being extended. This view has lead to EUR weakness over the week, helping boost demand for USD as the Fed has clearly signalled its intention to raise rates further this year.
After breaking down below the 1235.95 level support, Gold prices are now fast approaching the next key technical support at the 1205.29 level which was the July 2017 low. A break here paves the way for much deeper declines with the 1122.13 level (2016 low) the next major support zone.
Silver prices were equally depressed this week, marking their seventh consecutive losing week as a stronger US Dollar takes its toll. However, there has been an interest report out from a Reuters analyst which forecasts silver to see a surge in demand from the auto sector over the coming years driven by increased demand for electric vehicles.
Silver prices are now moving steadily below the key 15.65 – 15.80 level support which broke earlier this month. The next key support zone to watch will be a retest of the 2017 low around 14.1327 with the rising trend line from 2016 lows coming just ahead of the level.
Despite weakness seen elsewhere in the metals complex, and on the back of six straight weeks of losses, copper prices sustained a small recovery this week. News of an apparent pact between the US and EU to work together to improve trade relations fuelled a relief rally in copper which has been hard hit in the wake of escalating global trade tensions. President Trump and EC President Juncker said that they will work together to dismantle tariffs and improve free trade with Trump declaring a “new phase” in EU / US relations.
After breaking down below the 2.961 level which was a major support zone over most of the last year, copper has since gone on to test deeper support around the 2.764 level which was the late 2016 / mid 2017 high region. After piercing the level initially, demand has since kicked in with copper bouncing higher. If we see further upside, bears will be looking to use a retest of the 2.961 level as an area to reload shorts.
Iron ore prices rallied strongly this week despite a firmer US Dollar fuelled by the latest data release form the World Steel Association which note that global steel production was at 151.4 million tonnes in June, up just shy of 6% on the prior year. Iron ore prices had been under pressure over recent months due to rising uncertainty around the US / China trade war. However, this latest data has given bulls encouragement that demand remains strong and should continue to support further upside.
After testing the $63 level support for a third time, price has subsequently moved sharply higher and looks now to be heading back towards the top of the recent range. The key level to watch is the $69 level which has proved staunch resistance over recent months. Until this level is broken, the range will continue to develop.