Gold
With a host of central bank rate decisions slated this week, it will be an important week for metals. In the US, the Federal Reserve is widely anticipated to reduce its headline rate by a further 25 basis points this week. If the Fed follows through on these expectations, this should support gold, seeing price trading higher over the short-to-medium scale view. However, the forward guidance issued by the Fed will also be instrumental in determining how gold is likely to trade. If the Fed is once again heavily divided over its decision to ease and downplays further easing, this could negate some of the bearish reaction in USD, as we saw last time, equally curtailing upside in gold. Additionally, given the level of division among policymakers seen last time around, there is a risk that the Fed will not cut rates at this juncture, instead, holding off for later in the year. Such an outcome would exert negative pressure on metals in the near term, with USD likely to rally strongly.
Risk flows will also be important this week. Over the weekend, reports around the US-Sino trade negotiations hosted in Washington on Friday were very positive. Both the US and China agreed that solid progress has been made and the details of the “phase one” trade deal were very close to being agreed. These reports are likely to keep risk sentiment well supported over the week which will likely impact gold lower as safe-haven flows become diminished.
In terms of risk flows impact on metals, it is also important to monitor Brexit developments. The EU is due to give the UK a new Brexit deadline this week and the timeframe will be very important. A short term deadline (shorter than the three months request) will keep no-deal fears alive, which will be risk negative, while the requested extension or longer should be risk positive, reducing no-deal risks.
Silver
As with gold, the price of silver could be subject to plenty of movement this week given the risk events on the table. Downside forces from improved risk sentiment around US-Sino trade negotiations will come into contact with upside pressures from a Fed rate cut (if we see one). Silver prices have been trading higher recently amidst greater expectations of Fed easing which should continue this week as the key driving factor.
Technical & Trade Views
XAUUSD (Neutral, Bullish above 15322)
XAUUSD From a technical and trade perspective. Gold is still hovering around the monthly pivot here. With longer-term VWAP still supportive, a break higher remains likely. The key level to watch in the short term, however, will be the monthly R1 at 1530.26, if price holds a test of this level we could see a short-term double top taking prices lower. On the other hand, if we break above that level I will monitor a retest for long opportunities.
XAGUSD (bullish above 17.50, targeting 19.50)
XAGUSD From a technical and trade perspective. Silver prices have moved back above the yearly R1 for now. While we hold here, a move back into the yearly highs remains the objective. Longer-term VWAP still supports with momentum studies showing room for further appreciation also. A test of offers into the monthly R1 at 18.7790 could see initial resistance but ultimately looking for a break higher with any dip from that level likely to find support.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!