Its been an unusually quiet week for gold prices following the large move over the prior week in response to news of the US-China trade deal.
With the two sides agreeing on the phase-one trade deal, risk sentiment has been much better supported this week, limiting the upside in gold. The US has agreed to a substantial reduction in tariffs in exchange for China agreeing to heavily increase US agricultural purchases.
The trade talks will then move onto discussing the next phase of the trade deal in January. The market is hopeful that the superpowers can finally dismantle the tariffs which have been in place over the last two years. This could be a major boost for risk appetite, likely seeing gold trade lower on reduced safe-haven demand.
The upside in gold has also been capped by a recovery in the US dollar this week. Despite the continued rally in equities, the USD recouped some of last week’s losses as the market reacted with relief to the latest US manufacturing data.
While the reading was slightly lower than expected, it showed that the sector remained in expansionary territory last month. This assuaged some of the recessionary fears for the US economy.
Gold prices made a further test of the 1481.93 level which is still holding as resistance for now as price continues to correct higher within the bearish channel which has framed the sell-off from 2019 highs.
For now, we can still view the pattern as a corrective bull flag suggesting that the upside could still materialize. If the price can break back above the 1481.93 level, the key level to watch in the short term is 1522.75.
This is a major long-term pivot for gold. Above here, the focus will be on a move back up to the recent 1554.69 level.
Silver prices have tracked the moved in gold, moving higher over the course of this week’s trading. However, prices are still within last week’s range, for now, reflecting a loss of momentum in the market.
News of a US-China trade deal should see silver prices supported over the medium term through increased industrial demand. Any further downside in the US dollar should also keep silver prices supported in the near term.
Silver prices continue to hold below the 17.3408 for now, but are testing the bearish channel top. While we can still view the current bearish channel as a corrective bull flag structure, for now, bulls will need to see price quickly back above the 17.3408 level.
Below 17.3408, the next major support level is down at 16.2130. This 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.