Gold Prices Soar As Trade Woes Dominate Into The Weekend

Gold

Gold prices traded higher again this week, boosted by both a weaker US dollar and deteriorating equities prices. The greenback turned lower late in the week by a set of disappointing Q1 GDP figures. These saw growth hitting just 0.5% against an expected 0.9% reading.

Alongside this, core PCE hit just 1%, quarter on quarter, versus an expected 1.3% reading. Trade balance data also showed that the US deficit remains high, at -$72.12bln. This is likely to keep Trump focused on advancing the trade war with China.

The intensification of the trade war between the US and China has knocked risk sentiment heavily lower this week. Trump announced last week that he had added Huawei to the “Entity List.” The list includes 44 Chinese companies which US firms are banned from dealing with without US government approval. As a result of this, China has now stepped up its rhetoric.

This week, veiled threats surfaced regarding the potential for China to use rare earth exports as leverage in the trade war. These materials are often used in high tech applications such as magnets and instrument displays. Restriction of these materials could cause huge disruption for US companies and the US government. So, it will be interesting now to see if the US responds in a more diplomatic manner.

Gold prices soared higher this week as the rally above the 1280.58 level continues. This has taken price up to just shy of the next big structural level at 1298.24. After breaking above the bearish trend line from 2019 highs price has recently turned lower from the level. A break higher now will open the way for a test of the 1310.17 level. To the downside, bears will need to see a break below the 1266.32 level to confirm a resumption of the bearish trend.

Silver

Despite a recovery off the lows tracking the moves in gold, as the combination of weakened risk appetite and a lower US dollar keeps the metal supported, silver prices ended the week just in the red. Silver has had a very bearish few months recently. So, bulls will be keen to attempt to build a base here. The recent FOMC meeting minutes didn’t give any indication of a forthcoming rate hike. This should allow gold and silver to stay supported in the near term, especially if trade war concerns continue to weigh on risk appetite.

Technical Perspective

After briefly piercing below the 14.3321 level this week, silver prices sharply recovered to trade back up to the 14.5190 level last. Silver has been net sold for four out of the last five weeks. And, despite the recovery this week, the tone remains heavy in silver. Bulls will need to see price quickly back above the 14.9161 level resistance to alleviate the near term bearish bias.

Dropping down onto the H4 charts, you can see that silver is still trading within the bearish trend line from February highs, which price has yet to pierce. Furthermore, local structural resistance is sitting at the 14.6298 level. This is creating an interim upside hurdle ahead of the higher time frame level.