The yellow metal has enjoyed a better week against the US dollar as the greenback has weakened once again. Following on from the prior FOMC meeting minutes, where some members raised the prospect of a rate hike in the remaining months of the year, bulls were quietly hoping for more of that discussion.
However, USD was sold sharply as the meeting minutes failed to provide any indication that a rate hike will be coming in 2019. The minutes showed that “In light of recent, softer inflation readings, some viewed the downside risks to inflation as having increased”. In terms of the outlook for future rate adjustments, the minutes concluded that “a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time.”
On the other hand, the minutes were good news for gold buyers. It looks as though unless things dramatically improve, we are unlikely to see a rate hike in the coming months. Furthermore, looking further out towards October, the market is increasing its pricing for a rate cut.
After breaking out above the short term bearish channel top at the start of the week, gold prices have since reversed lower. Prices are trading back inside the bear channel and back beneath the key 1280.58 level. However, into the final sessions of the week, we are once again sitting just atop 1280.58. This level continues to be a key pivot for gold.
While above here, the focus remains on an eventual break higher as the current bear channel can be viewed as a bull flag to the initial drive higher at the start of the year. If we break back below the 1280.58 level, however, we are looking to 1265.96 which has capped the recent sell-off. A break of that region will put focus on a run down to 1250.58 next.
Silver prices have been much stronger this week also. This comes following three straight weeks of declines, as a weaker US dollar and softer risk appetite have helped lift demand. Risk assets traded heavily lower this week. Concerns around the escalating US/China trade war once again came back into central focus.
Following China’s retaliatory 25% tariffs on $60 billion of US goods, the market this week reacted to news of the US banning US companies from dealing with Chinese tech firm Huawei. While the two sides continue to try and deliver a trade deal, the market is not displaying much optimism. Both equity and oil prices have collapsed lower, allowing gold and silver to trade higher on safe haven flows.
Silver is now sitting just above the 14.3321 support, having broken down fully through the 14.9161 level. This level now offers resistance should the market retest. Ahead of that level, we also have bearish trend line resistance from recent highs which has been framing the move lower. Below the 14.3321 level, the next key support will be the 14.0352 zone. This is a major long term level for silver and poses the risk of a much deeper move lower if broken.