Precious metals have had a very changeable week as a combination of factors have driven flows in both directions. Ultimately, price was contained within the ongoing 1481.93 – 1522.75 range which has framed price action over the last five to six weeks.
The FOMC minutes helped underpin gold as, despite the division among policymakers, the fed cited a concerned outlook for the US economy. While some members voted against a rate cut, others were in favour of a larger rate cut. With many in the fed noting that recessionary risks in the US have increased notably over recent months.
Looking ahead, the outlook remains subdued given the downturn in global growth and ongoing trade tensions with China. The market is pricing in one further rate cut this year most likely in December. Though the prospect of an October rate cut is now receiving greater attention. USD was down heavily in response to the minutes release which helped buoy gold prices.
News of the US army withdrawing from the Turkish/Syrian border has also prompted concerns for stability in the region. Turkey is invading Syria to establish a safe zone in which it can re-settle around one million Syrian refugees. However, the move has been opposed by the SDF and the risk of military conflict is rising.
The 13th round of trade talks being held this week got underway yesterday amidst a backdrop of cautious optimism from traders. The market is hopeful that the two sides will be able to agree to a partial trade deal which can act as a stepping-stone towards a fuller deal down the line.
The first day of talks concluded without a deal being agreed, though Trump told reporters “We had a very, very good negotiation with China”. Chinese Vice Premier Liu He told reporters that “The Chinese side came with great sincerity, willing to cooperate with the US on the trade balance, market access, and investor protection”.
Gold prices remained capped by the upper line of the falling wedge pattern which has framed the recent consolidation near highs. For now, a further push to the upside is still in the outlook.
However, If we break below the 1433.24 level, the 1392.28 level is the next support zone to watch.
Silver prices have broken free of their typical correlation with gold prices this week.
Prices traded higher over the week, after recovering from initial lows. A weaker USD has been helpful for Silver. It has also benefitted from optimism around ongoing US /China trade negotiations.
Silver stands to gain from a trade deal (albeit a partial one) given its frequent industrial usage. This often sees it deriving support from upward moves in equities, particularly industrial indexes.
Silver prices continue to range between the 17.3408 support and resistance at the 18.6397 level. Silver prices remain capped by the upper trend line of the bull flag pattern which has formed on the pullback from recent highs. While above 17.3408, the focus remains on a further move higher.
However, If prices break down below the current support, the next major support level is down at 16.2130 which also holds the retest of the broken long term bearish trend line. To the topside, the 18.6397 level remains the key marker to break.