Is Gold At A Major Turning Point?

Gold

The yellow metal ended the week lower as a resurgent US dollar weighed on price.

Gold had initially been stronger in the week thanks to concerns over President Trump facing impeachment weighing on risk sentiment. Speaker of the House Nancy Pelosi launched impeachment proceedings over a phone conversation between Trump and the Ukrainian president regarding Joe Biden.

Following some initial weakness in equities, however, risk sentiment soon recovered.

Midweek, comments from Trump at the UN also supported risk sentiment. The President stated that a deal with China could come sooner than people think.

The market recently heard that the Trump administration was considering an “interim” deal with China which would see the US scaling back some of the current tariffs, as well as postponing others. This would be in exchange for China making commitments over intellectual property and US agricultural purchases.

Negotiators from both sides are due to meet in the US in under two weeks. For now, optimism around the meetings is keeping gold prices lower as risk sentiment remains buoyant.

The US dollar remained firm over the week despite US Q2 GDP coming in at an unchanged 2%, confirming slower growth over the quarter than Q1.

For now, the main story for the US dollar continues to be reduced expectations of further Fed easing. This will likely gain traction should we see progress with US-China trade talks, keeping USD supported.

Technical Perspective

Gold prices tested the long term 1522.75 level once again this week and have reversed. For now, this move appears corrective and a further push to the upside is still in the outlook.

However, there is the risk of gold putting in a lower high now and this current move can extend a little lower towards the 1433.24 level. While we hold above the 1433.24 level though, focus is on a further grind to the upside. If we break below the 1433.24 level, the 1392.28 level is the next support zone to watch.

Silver

Silver prices have had a disappointing week also.

Tracking the moves in gold, silver started the week on a firm footing before reversing lower over the second half of the week. Silver has been caught in the crossfire recently between the ongoing US-China trade negotiations and expectations around further easing from the Fed.

Unlike gold, however, silver can still see some upside should an end to the trade war present itself. This is thanks to the support it derives from higher equities prices, particularly the industrials.

Technical Perspective

Silver prices continue to range between the 17.3408 support and resistance at the 18.6397 level. Having retested the resistance level this week and reversed sharply lower. While the support level holds, focus remains on a further rotation higher.

However, If prices break down below the current support, the next major support level is down at the 16.2130 which 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.