Weekly Metals Wrap

USD Rebound Sends Gold Lower As Market Focuses On Further Fed Rate Hikes

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Gold

The yellow metal posted its second consecutive negative week as the resurgent US Dollar pushed gold down. The Dollar had initially been weaker at the start of this week’s session due to the outcome of the US mid-term elections which saw Trump’s Republican party losing control of the House of Representatives, resulting in a divided Congress which will make it difficult for Trump to pursue fiscal expansion. However, traders soon shrugged off the political event to focus on the Fed and the continued tightening in US monetary policy.

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The Fed kept rates unchanged as expected but reaffirmed its message that further increases are necessary, bolstering expectations of a December hike. The Fed acknowledged the continued decline in the unemployment rate and the continued growth of household spending though did say that business investment has moderated from the high levels seen earlier in the year.

xauusd

Gold prices remain penned in below the 1235.30 resistance level which has now capped price action for three consecutive weeks. For now, there is still the chance of a break higher which would bring the broken bullish trend line from 2015 lows back into focus. To the downside, the 2018 lows at 1158.84 are the main level to watch.

Silver

Silver prices this week were more closely aligned with the moves in gold rather than the soaring equity prices seen in response to the news of a potential trade deal between the US and China. Silver prices have been fairly stagnant at current levels over the last 6 weeks and this week’s moves are merely a further rotation within the range.

silver

Silver prices remain sat just above the 13.6704 – 13.9612 level support which has stemmed the decline for now. However, unless the price makes it back above the 15.1825 – 15.5734 level, the focus will be on the further downside.

Iron ore

After the strong rally seen initially in the week, iron ore prices slipped back later in the week conceding some of their earlier gains. The sell-off came despite BHP Billiton warning that the group’s Port Hedlund iron exports would suffer disruption following the derailing of a train on the group’s privately-owned cargo rail line.

The mining company said that inventories held at Port Hedlund were unlikely to be able to cover the loss of supply resulting from the accident and it would, therefore, liaise with clients regarding its commitments along with noting that it will likely take around one week to repair the damaged line.

Furthermore, with Chinese steel markets holding up, it seems that the losses were likely down to the weak Chinese import data which showed imports of iron ore falling to a four-month low in October as trade war concerns plagued market appetite. Adding pressure also has been the rebound in USD which quickly recovered off the post-US elections lows seen earlier in the week after the mid-term elections resulted in a divided Congress.

iron

The recent decline in Iron found support at a retest of the $74 level and for now, price remains hemmed in between there and highs around $79. For now, focus remains on further upside. If we see a deeper retracement from here, the mid $72 level is the next key support while below there, the retest of the breakout base around $70 will be the main level.

Copper

Following the rally in copper last week, fuelled by optimism around a potential US / China trade deal, the red metal disappointed bulls this week and slipped lower once more. The main driver behind the move was the weak import data for October which showed copper imports having slipped 19% from the prior month.

However, it is worth noting that the data considers the period over the country’s national Golden Week holiday during which time activity shuts down, so traders will need to wait for the November data to get a proper read on 4Q activity. Copper prices have been fairly stagnant over the last seven weeks following the large rally we saw in mid-September.

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For now, copper prices continue to battle it out around the 2.767 level which has seen volatile but evenly matched order flow. To the downside, we have support at the 2.567 level (2018 low) with the rising trend line from 2016 lows coming in around the same level also and a deeper 2.443 structural level below that. To the topside, the 2.959 level is the main resistance to watch (broken 2015, the range of swing lows over late 2017 / early 2018).

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