Metals Under Pressure on Monday
The metals market is seeing a rather lacklustre open to the week with both gold and silver under selling pressure across early European trading on Monday. A fresh uptick in the US Dollar is having a subduing impact on price action currently with the greenback drawing safe haven demand from market uncertainty over civil unrest in China. Broadly speaking, the outlook for the metals market has improved somewhat on the back of last week’s FOMC minutes. With the Fed now clearly signalling its intention to slow down the pace of hikes, both gold and silver look vulnerable to further upside in the coming months if USD unwinds further.
USD in Focus
Looking ahead this week, along with monitoring developments in China, traders will be looking to the latest set of US labour reports. In terms of the China situation, any further escalation in the unrest will no doubt further weaken risk sentiment, driving USD higher near-term, weighing on USD. However, if the situation de-escalates, we should see USD falling back as focus returns to Fed expectations and December FOMC pricing, allowing metals to recover.
Jobs & GDP
Ahead of the jobs data on Friday, we also have advanced US GDP on Thursday which will be closely watched. In terms of market impact, a weaker number might be a little better here for metals traders. Softening of the economy supports the view that the Fed will likely ease the pace of tightening, allowing USD to come off near-term, supporting higher prices in metals. However, if we see an upside surprise, this might bolster the view that the Fed still has some scope to continue with larger hikes for now. The same dynamic is true when it comes to receiving Friday’s jobs data.
Technical Views
Gold
The breakout above the bear channel has seen the market advancing as high as a test of the 1791.63 level, where price is stalled for now. The subsequent correction lower has seen 1722.37 acting as support and while this level holds, the focus remains in favour of a continuation of the breakout and a move above current highs towards the 1871.04 level next.
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Silver
As with gold, the breakout in silver has seen a decent rally off the October lows, currently stalled into a test of the 22.3205 level. With 20.3398 holding as support, the outlook remains bullish for now with a break of 22.3205 the preferred move. Below 20.6398, 19.5643 is the next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.