Weekly Commodities Wrap

Hawkish FOMC Fuels Further USD Rally Weighing on Metals

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Gold

The Yellow Metal hit a fresh 12-month low this week, registering its fourth consecutive losing week, as the US Dollar rallied gathered pace. The moves came in response to the latest Federal Reserve FOMC meeting. Although the central bank kept rates unchanged as was widely expected, the accompanying statement registered a more hawkish shift for the bank, with a few key changes suggesting the bank is well on course to raise rates – at least a further two times this year.

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Coming on the back of last week’s bumper 4Q GDP print, the Fed acknowledged “strong” growth in the economy and continued improvement in inflation. Consequently, the market has increased its pricing for a September rate hike which, along with hopes for negotiations on trade tariffs between the US and China, has weighed on Gold and is expected to continue to do so as we head through the summer.

Gold prices are currently challenging the 1205.29 level support after piercing the level slightly, to plumb a fresh 12 month low. If prices can find any support here, the 1235.95 level above should provide resistance for continued downside as the market begins to eye the major 1122.13 level support.

Silver

Silver prices tracked the moves seen in the gold market this week, cratering lower to also hit fresh 12-month lows. The Silver selling spree has been more sustained than the Gold spree, with prices now registering their eighth consecutive losing week. The moves will no doubt come as a relief for many after Silver spent most of the last ten months in a tight block of congestion.

forex trading silver

Having broken below the key 15.65 level support, Silver prices are now on their way to testing the next big technical zone around 14.1327, which was the 2017 low. Just ahead of that level we also have the rising trend line from 2016 lows.

Copper

The Red Metal received no love from the market this week as the combined forces of a stronger US Dollar and growing concerns regarding the US / China trade standoff, once again saw investors selling the metal. Copper has been under heavy selling pressure over the last two months, tracking the escalation in the dispute between the US and China over trade tariffs.

While some are quietly hopeful that the US and Beijing will begin negotiations following the US’s U-turn with the EU, others are not so optimistic. However, we might see some demand kick in for Copper shortly, as overnight workers at BHP Biliton’s Escondida mine in Chile. Chile, who produces roughly 5% to 6% of the total global Copper supply, voted in favour of a thirty-day strike which could commence in mid-August. Strikes at the mine last year were a major source of upside pressure in Copper.

forex copper

After taking a brief pause as they tested the 2.768 level support, Copper prices are now making another move lower which, if successful, will bring the 2.478 – 2.447 level support into focus. Any correction higher should see the 2.963 level act as strong resistance for continued downside.

Iron

The rollercoaster ride continued in Iron ore this week. After reversing off recent lows, Iron traded all the way back up to the $68 mark before once again sharply reversing. A strong US Dollar and concerns around the US / China trade standoff continue to be the driving force behind the decline. The latest Chinese manufacturing data showed the weakest level of orders in the last two years in July, fuelling concerns about the possible impact of the trade war.

forex iron

The block of consolidation which has framed price action over the last several months continues to play out. After testing the $63 level support, prices subsequently made their way back up to test the roof of the consolidation around $68, only to be capped there for a fourth time. For now, the range play remains intact until either boundary is meaningfully broken.

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