It’s been a quiet week for metals despite plenty of developments to note. As of writing, gold prices are just a little below the weekly open and have yet to break the range of the prior week.
The week started with a weaker tone to risk appetite. This kept gold prices supported as traders reacted to news that China was reluctant to sign the trade deal agreed to at last week’s trade talks in Washington.
Despite Trump having announced that a deal had been done, the two leaders are yet to officially sign off on the deal. China is reportedly concerned with some of the details of the deal and needs to go over things some more before it is willing to ratify it.
This was a worrying sign for markets given that talks collapsed earlier in the year with Trump accusing China of wasting time and backing out of the deal at the last minute. Indeed, the US was quick to issue a warning to China saying that it would press ahead with the next round of tariffs in December if a deal is not done.
Reports from Chinese media have quoted officials as being on board with the deal. Deputies from both countries are due to speak on the phone next week ahead of further talks to be held before the November APEC meeting at which Trump is planning to get Xi to sign the deal. For now, traders remain cautious and flows have been light accordingly.
Into the middle of the week, focus shifted to weaker than expected US data with retail sales for September showing a decline. This marks their weakest reading in seven months. On the back of recent data misses in manufacturing, non-manufacturing, CPI and subdued wage growth, expectations for an October rate cut from the Fed have grown, keeping gold prices underpinned.
Gold prices continue to range within the falling wedge pattern which has framed the recent consolidation near highs. The recent 1472.80 level has formed interim support and while above here, a further push to the upside is still in the outlook. However, If we break below, the focus will shift to the 1433.24 level next and the 1392.28 level beyond that.
Silver prices have broadly tracked the moves in gold this week. Despite an initial run to the upside, silver has now reversed and is trading a little lower on the week. The ongoing uncertainty around US/China trade war negotiations as well as Brexit and fluctuating Fed easing expectations has made it difficult for traders to establish a clear directional view in metals. Silver prices are trading roughly at the same level as three weeks ago, highlighting the stagnation in the market as traders wait for a clear catalyst. An October rate cut from the Fed could prove to be a strong upside driver for silver though the contribution from trade war developments is uncertain at this point meaning that for now, the waiting game continues.
Silver prices are still hugging the 17.3408 support and remain capped by the upper trend line of the bull flag pattern which has formed on the pullback from recent highs. While above 17.3408, the focus remains on a further move higher.
However, If prices break down below the current support, the next major support level is down at 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.