Trump’s Trade Talk Comments Send Equities Soaring, Keeping Gold Capped

Gold

The yellow metal was lower again this week as, despite a subdued US Dollar, surging equities prices saw investors moving away from safe havens.  The SPX500 has traded up to levels not seen since October 2018 this week. This comes thanks to optimism regarding a potential US/China trade deal continues to drive the rally in risk assets.

Trump Sounds Hopeful

Donald Trump lit a fire under equities prices into the back end of the week with comments made ahead of a meeting with Chinese Vice-premier Liu. Speaking from the White House, Trump told reporters that the two sides had found agreement over some of the toughest issues in the negotiations. He added that a deal could now come within the next four weeks.

“Epic Deal”

Speaking in his usual casual manner, Trump said:

 “This is an epic deal, historic – if it happens…This is the Grand Daddy of them all and we’ll see if it happens. It’s got a very good chance of happening.”

Importantly, these comments were echoed by the Chinese VP, Liu, who said that the US and China had found consensus over some of the key aspects of the agreement such as the text of the economic and trade agreement.

World Growth Hopes

News of such progress is a major boost for markets given the heavy decline in world growth seen over the last 12 months which both the IMF and the OECD, as well as numerous central banks, have each attributed to the US/China trade war. However, such a deal would likely be bearish for gold. The metal was appreciating strongly last year due to the risk-off tone sweeping markets. With the SPX500 having nearly erased these losses now, investors are less concerned with parking their capital in gold.

Technical Perspective

Gold prices continue to stagnate towards the top of the large contracting triangle pattern which has framed price action over the last few years. Currently, price is sitting on the recent 1280.26 support which continues to hold price up. Below here, the next support is at the 1244.18 level, with the supporting trend line from 2015 lows coming in below that.

The lower timeframes show the pressure mounting in the 1280.26 level with a descending triangle running from 2019 highs. We would need a break above the bearish trend line to alleviate near term bearishness.

Silver

Silver prices have performed a little better than gold this week. While only slightly positive on the week, the combination of a weaker US Dollar and firmer equities prices has kept silver better supported than gold. Due to it often being used for industrial purposes, silver is being boosted by optimism around a US/China trade deal and the anticipation of a boost to world growth.

Technical Perspective

Despite testing, and piercing below, the 14.9705 breakout zone again, silver prices have once again found support. If price can hold above this level, putting in a higher low against last year’s lows, we could see another topside run. There is plenty of technical resistance overhead, however. The bearish trend line from 2016 highs is coming in around some key structural levels starting at 15.5359 and running up to 15.7342. If we break back below the 14.9705 level, the next key support is down at the 14.0311 level.

On the lower timeframes, you can see price is currently caught in a range between 14.705 and 15.2161. This is offering opportunities to trade a topside break targeting 15.5359 initially.