Metals Looking To Move Higher On USD Retreat
The metals complex has started the week with a bid tone as both gold and silver attempt to trade to the upside here. Relatively speaking, price actions remains fairly muted for now and with the US markets offline for the MLK holiday, flows are likely to remain light today. Metals prices have been subdued over recent sessions though are still sitting higher against the 2022 lows, keeping the focus on further upside in the near term.
The key driver for metals markets remains USD at this point. Last week saw a slew of key US data with CPI, PPI and Retail Sales for December all coming through. While retail sales and PPI were both stronger-than-expected, retail sales came in well below forecasts. Given the correction in USD upside we have seen over recent weeks, Friday’s data suggests there is room for further USD decline in the near term, and metals upside consequently, on any further data misses.
With the market having built up such elevated Fed tightening expectations, we are currently seeing a period of recalibration in USD positioning. However, for now the market is still looking for the Fed to hike in March. However, if this view shifts this could lead to much deeper declines for USD, paving the way for a much broader rally in metals.
Looking ahead this week we have little in the way of key US data, so attention is likely to be on broader risk flows (alongside USD flows). Equities have been under pressure of late, if we see this theme continuing this should help drive inflow to metals, particularly gold. However, if we start to see equities climbing here, this will offset the support from a weaker USD.
Technical Views
Gold
Gold prices continue to pressure the 1826.71 level resistance. With MACD and RSI bullish here, and with the bullish trend line acting as support, the focus is on an eventual break higher, targeting a test of the 1871.04 level next. To the downside, should we reverse lower from here, the 1763.88 level is the next support to note.
Silver
For now, silver prices are trading within a shallow corrective channel, set within the broader bear channel. The current support base of 22.3205 is underpinning the structure and, while intact, might pave the way for a break of the 24.0073 level and bear channel top, affecting a shift in trend. However, should we see price roll over from here, a break of 22.3205 will put the focus on 21.4525 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.