Metals Stall Against USD Strength

weekly metals wrap

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Gold

It was a lackluster week for the yellow metal this week. Sellers stepped in to take price lower from the 1522.75 level.  Gold was weighed on over the week by the rise in USD which was lifted by the July FOMC minutes. The release was eagerly awaited by traders looking to gauge the likelihood of further rate cuts this year as well as how many potential cuts to expect.  

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However, the minutes’ release left the market disappointed. They failed to provide any new information. They also downplayed the potential for further cuts, referring to the rate cut as a “mid-cycle adjustment”.

The minutes noted:

Most participants viewed a proposed quarter-point policy easing at this meeting as part of a recalibration of the stance of policy, or mid-cycle adjustment, in response to the evolution of the economic outlook over recent months. A number of participants suggested that the nature of many of the risks they judged to be weighing on the economy. The absence of clarity regarding when those risks might be resolved. Thus highlighting the need for policymakers to remain flexible and focused on the implications of incoming data for the outlook.”

In response to the release, pricing for a September rate cut came off slightly, which led USD higher, weighing on gold prices. An easing of tensions between the US and China has also allowed for some selling on gold. We have seen reduced safe-haven inflows this week. The two nations are due to meet in September for a further round of talks which looks set to happen at the moment.

However, the troubling situation in Hong Kong presents risks. While the US has warned that a trade deal could be difficult to do if China uses force on protestors, China has warned the US to stay out of the situation or risk the trade talks collapsing again. As such, the situation remains fragile and there is plenty of upside risk for gold.

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Gold prices paused in their ascent this week with the major 1522.75 level remaining firm resistance for now. Gold prices remain firmly bullish, however. While above the 1433.58 level, focus is on a further push higher. The 1566.15 level is the next topside zone to watch.

Silver

Silver prices have been softer this week also. Prices have pulled back from recent highs, as a stronger US dollar has dampened upside for now. Silver had been tracking the recent rally in gold, breaking out to their highest levels since early 2018. Escalating trade tensions between the US and China fuelled the gains.

But, tensions have eased somewhat. This is due to the US having postponed a portion of the new 10% tariffs due September 1st until a later date. Markets are more optimistic that a deal will be reached.

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Silver prices remain capped by the 17.3336 level for now, following a brief move above the level last week. The 16.5877 level underpinned the move lower. While above here, focus remains on a further grind higher with the 17.6936 level the next topside marker to watch.

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