With the US Dollar having weakened over the course of the week, gold prices were able to post a small recovery, rallying up off last week’s lows to close green on the week. Gauging the USD reaction to the latest trade war headlines has become increasingly difficult over recent weeks. USD had been gaining actively over past months as the market viewed it as being the ultimate winner in the US trade dispute with China.
However, the recent news that the US and China are due to restart negotiations put downward pressure on the currency which has remained despite the trade war escalating once again as the US applies a new 10% tariff to further Chinese goods and China responding with its only tax on $60 billion worth of US goods. It seems that the market is looking past these moves, which were widely signaled and is instead focusing on the prospect of negotiation.
Gold prices are still fighting to get back above the July 2017 low of 1205.29. An upside break of this level is needed to alleviate near-term bearish bias. While below this level, the focus remains on the further downside with the 1122.13 level the important next downside target.
Following the moves noticed with gold, silver prices were also able to post a recovery this week, managing to trade back up off recent 12-month lows. Despite the dramatic decline in silver prices this year, many players still forecasting higher rates to come linked to strong demand from the auto sector which is expected to materialize over the remainder of the year and early into next year.
Silver prices are still fighting to stay above the 2016 14.1103 low. While above here, further consolidation is likely with the risk of some correction higher. However, the focus remains on further downside unless the market can start to build some topside traction and put pressure on the 15.60 – 15.80 level resistance.
The red metal, which has been under reasonably relentless selling pressure over the last few months, posted a strong recovery this week trading back up to print fresh four-week highs. The moves were mainly linked to USD weakness which has alleviated some of the bearish momentum in copper markets, fuelling swift short covering among many of the later speculators to join the cascade.
The news of the US and China preparing to re-engage in negotiations has seen a scaling back of global trade concerns as the market optimistically anticipates some truce being reached, following a similar pact made between the US and the EU earlier in the summer.
The rally in copper has price heading back up to test the 2.769 level which could see short-term resistance. Above there and the focus turns to a retest of the 2.964 level which was vital support over late 2017 /early 2018 and is now a fundamental upside level to break. To the downside, support remains around the 2.442 level with the rising trend line from 2016 lows in the area also.
Iron ore was once again the clear winner over the week surging to a fresh six month high. The moves have been attributed to USD weakness but also to market speculation that the PBoC might look to ease further following the latest round of US tariffs on the country’s goods. The production environment is also supportive of higher prices as the most recent data from the Chinese National Bureau of Statistics showed that iron ore production fell to its lowest level since February 2010 in August.
The latest rally has taken price back up to challenge the critical $70 level. Price attempted to the last month’s level but reversed sharply. If the price can break out above the level this time, we should see momentum players joining the market to take price higher still. $72 is the next critical level to watch to the topside.