Metals Heading Lower as USD Rallies
The metals complex is looking vulnerable to a further drop lower this week as both gold and silver start the week under offer. Resurgent strength in USD on the back Friday’s bumper jobs report reflects the re-sharpened focus on hawkish Fed expectations. With traders now widely anticipating a further .75% hike this month, along with further hawkish signals, USD looks likely to continue higher near-term, which should keep gold and silver prices pressured. Indeed, with USD drawing the majority of safe-haven inflows, metals aren’t even being supported by the cross-flows from weaker risk sentiment this week.
Looking out across the week, the headline focus for metals traders will be US CPI due mid-week. In light of the built-up hawkish Fed expectations in the market, a further strong CPI reading should see USD remain in favour across the week, keeping metals anchored lower. However, if there is any surprise drop in consumer prices over June, this would no doubt raise some doubts over the prospect of a continued, aggressive hiking schedule beyond July, likely weighing on USD and allowing metals room to recover. With this in mind, metals traders will be closely watching US CPI data this week, which has the potential to fuel plenty of volatility, not least for metals. Following the CPI print, we also have US retail sales on Friday. This data will give a fresh glimpse at the latest performance of the US economy and, given its importance in calculating GDP, holds the potential to create further volatility for USD and metals alike.
Technical Views
Gold
The recent breakdown in gold prices saw price breaking under the 1791.63 support level. With the large, bearish channel still developing, gold prices look prone to further downside towards the 1722.37 handle next and, should we break below there, the 1679.77 level thereafter. With both MACD and RSI giving bearish signals, the near-term outlook remains bearish. Only a break back above the 1791.63 level will alleviate near-term downside risks for gold.
Silver
Silver prices have been trending steadily lower this year in a well-defined bear-channel. Price recently broke down through the 20.6398 level and has since moved under 19.5643 also. With both MACD and RSI bearish, the focus is on a continuation lower towards the 18.4421 level next. To the topside, only a break of the channel top and the 20.6398 level will alleviate near-term bearishness.
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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.