Gold
The outlook for precious metals is evolving in light of the changing expectations for the path of the US dollar. Although the Federal Reserve pressed ahead with a further rate cut at its most recent meeting, Chairman Powell explained that the central bank would now be sitting on its hands while it assesses the impact of looser monetary conditions in the US as well as the progress of US-Sino trade negotiations. Market pricing for a December rate cut has now fallen to near 0% in reaction to recent data strength in the US. Following a beat on the October NFPs, the October ISM non-manufacturing reading was shown to have rebounded strongly over the month, recovering from the three-year lows seen in September. Looking ahead this week, the market will be paying close attention to October CPI due on Wednesday. If we see any upside surprise here, this could push the dollar higher still, which would see metals sinking lower. However, if the CPI number comes in below market forecasts, this could put a halt to the near term rise in the dollar, allowing metals to recover. Despite the expectations that the Fed will remain on hold over the rest of the year, many analysts are still looking for further easing from the Fed in the early part of next year so incoming data across the next month or two is expected to have a visible impact on price action in both the dollar and gold.
Silver
Along with US economic releases, metals traders will also be keeping an eye on developments within US-Sino trade negotiations. Recent headlines remain positive, keeping expectations of a deal encouraged. The US Secretary of Commerce Wilbur Ross recently commented that negotiations were “very far along” with the two sides “making good progress”. The market is expecting that the “phase one” trade deal will be signed at the upcoming November APEC meeting in Chile on November 16th- 17th. For now, commentary around negotiations remains positive with both sides noting that negotiations are progressing well. If a deal is signed, this is likely to exert heavy downside pressure on metals as safe-haven flows will be heavily hit. The US has warned China that if a deal is not signed by December 15th, it will press ahead with fresh tariffs. Such an outcome would be heavily bearish for equities markets, seeing metals supported through safe-haven inflows.
Technical & Trade Views
XAUUSD (Bearish, below 1474.70)
XAUUSD From a technical and trade perspective. The sell-off in Gold has seen the longer-term VWAP turning negative here, suggesting further losses likely. Price has broken below the monthly S1 at 1474.70 and any retest of the level should hold as resistance, keeping the bearish bias intact.
XAGUSD (Bearish, below 17.1753)
XAGUSD From a technical and trade perspective. Silver prices have reversed lower also with longer-term VWAP flipping negative, creating a bearish outlook. The yearly pivot at 15.6951 could see some interim bids though while price stays below the 17.1753 level, lower prices are likely.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!