The yellow metal was higher this week, driven by a surge in safe-haven demand as rising fears over the health of the US/China trade negotiations saw equities heavily lower. News that the US had passed legislation offering support to the pro-democracy protestors in Hong Kong was met with fury by China.
China had previously warned the US not to get involved in the situation. While Trump had done his best to stay neutral, he was eventually forced to support the bill under rising political pressure. China immediately postponed a US naval visit. Reports also circulated saying that trade talks had broken down. Equities prices around the globe were quickly lower. Losses increased on news that China was considering banning US diplomatic passport holders from traveling there.
Into the middle of the week, however, the situation appeared to calm down as China reassured markets that talks were continuing. China does, however, continue to insist that the US remove existing tariffs in order for the phase-one trade deal to be signed. The US continues to refuse to remove tariffs, meaning that the chances of a deal being done this year appear in jeopardy.
If a deal is not signed in the coming weeks, the threat of fresh tariffs from the US will come into focus. Such as development would likely see gold sharply higher on increased safe-haven flows, as equities prices sink lower again.
Gold prices have corrected higher within the bearish channel which has framed the sell-off from 2019 highs. Price is now retesting the 1481.93 level which is holding as resistance for now.
For now, the pattern can still be viewed as a corrective bull flag suggesting that 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 broke from their correlation with gold prices this week to trade lower. Despite the safe-haven support for gold, the rising uncertainty around the US/China trade talks is weighing on sentiment for silver. The sharp move lower in equities has also dampened price action in silver. The moves lower in industrial indexes are weighing down on prices.
Looking ahead to next week, the US FOMC meeting will be the key risk event for metals. A dovish outlook from the Fed might offer some support to metals though this might be offset by the ongoing uncertainty over the prospect of a US/China trade deal.
Silver prices are continuing to hold below the key 17.3408 level as the bearish channel develops further. While this channel can still be viewed 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.