Copper Prices Shake Off Weak China Data & Resurgent USD
Orbex Weekly Metals Wrap
Following an impressive run over recent weeks, gold prices retreated this week as the US Dollar rebounded from initial lows. Despite a heavy tone to the week initially, the USD was buoyed by the release of the 2018 4Q GDP on Thursday.
This saw the final reading of the year print 2.6%, well above the expected 2.2%. The reading brings overall 2018 growth to 2.9%, just shy of Trump’s 3% target, and sill a very a firm reading indeed.
Gold prices also received a knock this week from improved risk sentiment in response to the Hanoi summit between President Trump and North Korean leader Kim Jong Un.
The meeting ended prematurely and without an agreement. However, it seems it was indeed a positive step and has left the door open for further talks. The market welcomed Trump’s optimistic ton. For now, it seems happy to trade higher on the ongoing dialogue between the two sides.
Gold prices traded steadily lower this week. They made their way back under the 1325.96 level, which has now turned resistance. Price is fast approaching a key area where we have confluence between structural support at 1298.29 and the rising trend line from 2015 lows. Bulls are likely to use this area to reload. Only a break of this level would negate the bullish bias in the near term.
Prices were similarly lower this week, weighed on by the pullback in gold as well as the resurgence in USD over the week. Silver prices continue to receive bullish forecast by investment banks projecting higher prices on increased demand from the auto-sector. However, with world trade currently faltering, this increased demand seems yet to materialize. And, for now, prices remain subdued.
After trading up to test both the bearish trend line and the 16.2267 structural resistance a second time, silver prices have turned sharply lower. Once again, they are testing the 15.5700 – 15.1800 support. If price can hold above here, focus remains on an eventual break above the bearish trend line.
Though nowhere near as explosive as the moves we saw last week, Copper price continued to trade higher this week. Continued optimism around the ongoing US/China trade talks has kept the metal well bid.
However, a weaker than expected Chinese manufacturing reading, as well as a resurgent USD, combined to cap the rally this week. If headlines around US/China trade negotiation remain positive, we can expect higher prices to continue in copper as speculators look through short term weakness in Chinese data.
Price is now challenging key structural resistance at the 2.958 level (2015 high, late 2018 swing lows). If we retrace from here, bulls will be looking to use a retest of the 2.854 level as support for a further topside run keeping a focus on an eventual test of the highs around 3.280. Below 2.854, support is along the rising trend line from 2916 lows.
Despite a soft tone to the week’s trading initially, iron ore prices eventually began to rally later in the week. The move came despite the downside surprise in Chinese manufacturing. It seems to link to speculation of an increase in steel demand in China as the weather has started to warm up.
For now, iron ore prices remain below the 2016 swing high, keeping the threat of a double top formation alive. If price can break back above that structural resistance, focus will be on a test of the key psychological $100 level. If we move lower from here, any retest of the breakout base around $78 should provide initial support.