Metals In Meltdown As USD Rebounds
The uptick in the US Dollar over the last fortnight has taken a heavy toll on the metals complex with both gold and silver prices sinking. With the Fed having lad the groundwork for a March rate hike, and the market now keenly focused on gauging the likelihood of any increase on the banks current rate path projections, USD is firmly back in demand. Last week’s better than expected US GDP data was yet further evidence that the US recovery is picking up real momentum and, with this in mind, the market remains firmly focused on Fed tightening expectations, likely to keep metals prices weighed near term.
Over the weekend, reports that Russia has downplayed the likelihood of an “imminent” invasion of Ukraine has been welcomed by markets. Equities prices are rebounding firmly on Monday, which is diluting safe haven support for gold prices, further weakening the metals complex. While these reports are encouraging, the situation remains incredibly tense and markers are likely to react to any sudden shift in news-flow meaning that metals retain upside risks on any shift in risk sentiment.
Looking ahead this week, data wise, the main focus will be on the US labour reports due on Friday. A strong reading will no doubt add further fuel to the current USD rally, sending the metals complex lower as traders upgrade their Fed expectations. On the other hand, any unexpected weakness will likely see metals prices higher near term as USD sees some give back.
Technical Views
Gold
The rejection in gold prices from around the 1850 level has seen the market reversing underneath the 1826.71 level. Price is now testing the bottom of the bull channel. With both MACD and RSI turned lower, the market is vulnerable to a downside break of the channel, opening the way for a test of the 1763.88 level next. To the topside, bulls need to see the market swiftly back above 1826.71 to put the focus back on 1871.04 above.
Silver
The rejection at the bear channel top has seen silver prices turning sharply lower, trading back down to test the 22.3105 level support, with the rising trend line sitting there also. Price is now sitting within a triangle pattern within the larger bear channel, highlighting potential downside risks and a trend continuation. Should we drop below 22.3205 the next levels to note are 21.4525 and 19.5643 thereafter.
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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.