Volatile Week For Metals

Gold

It’s been a volatile week for gold prices with strong moves in both directions. Prices traded up to just shy of last week’s multi-year highs, before closing back near the middle of the week’s range.

Gold prices were initially heavily lower on the week as the market reacted to the Trump-Xi meeting at the G20 summit over the weekend. The two leaders agreed to re-start the trade talks which broke down in May when Trump unexpectedly announced a tariff increase from 10% to 25% on $200 billion of Chinese goods.

Alongside the decision to recommit to negotiations, Trump also said that he would not be tariffing the remaining $300 billion of Chinese goods entering the US each year. This went back on what he had previously threatened to do. However, the big surprise was Trump’s apparent U-turn over the Huawei ban.

The President signaled that he will once again allow US companies to deal with Huawei. The markets have taken this as a strong sign of his commitment to achieving a trade deal this time around.

Equities roared higher in response to the news which, along with some strength in USD, saw gold prices weighed on as safe haven flows dried up.

However, over the week, that upside momentum faded a little. Gold prices saw a strong reversal higher in response to weak US manufacturing and a soft non-manufacturing number.  For now, the prospect of Fed easing over the coming months is keeping gold prices supported. The market is now pricing in a .25% rate cut for the July meeting.

Gold prices continue to oscillate between the 1392.20 level and the 1434.59 region. The recent failure to break above the latter level on the second attempt presents the risk of a double top formation. This could be confirmed on a break below the 1381.81 lows, paving the way for a deeper correction lower in gold. While above this level, focus is on further upside. Bulls are looking for a break above the 1434.59 level next.

Silver

Silver prices have had an equally tumultuous week. Prices tracked the moves in gold to make attempts in both directions. They then settled back into the middle of the weekly range.

Silver has been well supported over the last month given the rise in expectations of a summer Fed cut, which has weighed on USD.

The deterioration in trade relations between the US and China over the last month has also supported silver. However, with the resuming negotiations, there is the prospect that silver could be dragged lower. It could track gold, as safe haven flows weaken.

Silver prices have potentially put in a lower high against the recent 15.5540 level, which could see a move lower back towards the 14.9161 level. If this level holds as support, focus will remain on further upside in the near term. The 15.6350 – 15.7340 zone is the key zone to break. A break above this region could signal the start of a much longer-term shift in silver prices. Alternatively, a break back below the 14.9161 level could see a run back down to the 2019 lows around 14.3321.