Gold: Weaker US Dollar Keeps Gold Supported

The price was something of a proverbial roller coaster this week, caught between opposing forces of a weaker US Dollar providing support and a risk-off environment fuelling supply. Despite the Fed being engaged in a hiking cycle, it seems that it is flows rather than rates which are having the most impact. Despite widening US rates, stagnating portfolio inflows have kept the pressure on the US Dollar. While this dynamic has lent support to the US Dollar, surging equity prices have made investors less willing to turn to the low yielding, safe haven asset, as there are better returns to be made elsewhere. Another interesting development over the week, which has seen the price of gold trading higher, was the release of a report by Chinese officials on Wednesday; recommending ceasing UST purchases fuelling Gold recovery. This report put a lot of pressure on the US Dollar and saw Gold trading higher to recoup prior losses.

(Click on image to enlarge)

After testing the rising trend line of the bullish channel running from 2016 lows, the price has since moved back above the key 1294.17 level, which has been a key resistance point over much of last year. Above this level, the focus remains on further topside movement, with the bearish trend line from August 2016 highs.

Silver: Silver Deposit Discovery Weighs On Price

Silver prices began heavier trading this week as, despite the weaker US Dollar, positive investor appetite has weighed in. Adding further weight to the price of silver this week was the report of the discovery of a huge silver deposit in inner Mongolia. Chinese media reported that a deposit containing over 100 million tonnes of silver ore has been discovered in the autonomous region of inner Mongolia.

(Click on image to enlarge)

.After bouncing off the key support at the 15.60s – 80s level, silver prices have since broken back into the contracting triangle pattern which framed price action over most of last year. While price remains above the rising trend line of the contracting triangle pattern, the focus will be on a test to the resistance trend line of the contracting triangle pattern. This pattern framed price action for most of last year.

Copper: Higher Prices Forecast

Despite a weaker US Dollar over the week, copper prices were softer, retreating from an earlier run-up towards 2017 highs. Despite the fallback, industry commentators are forecasting better prices for copper due to the synchronized pickup in global growth, which is creating better demand for industrial metals.

BofA released a note this week arguing that demand from China is likely to remain strong, which should keep copper prices supported as demand in the rest of the world similarly picks up. They also point out that mining strike issues in countries such as Peru and Chile, could disrupt the supply side and see further support for prices. This idea is backed up by BNP Paribas, who also highlight the likelihood that the trend of higher prices is likely to continue.

(Click on image to enlarge)

The red metal is still firmly within the bull channel which has been running since the 2016 lows. For now, the 3.267 (mid 2014 high / 2017 high) remains the key level to the topside, with a break of that high bringing the mid 2013 high of 3.460 into play. On the downside, key support is coming in along the rising support trend line of the bull channel, and below there a retest of the broken bearish trend line from 2011 highs.

Iron: World’s Largest Producer Forecasts Turbulent Year

Iron ore prices have been recovering strongly over the last few months as the impact of steel production capacity cuts in China has diminished. However, Australia, which is the world’s largest producer of iron, has warned that 2018 will not be a smooth year for the industrial metal. Due to the fact that the country’s department of Industry forecasts an uptick in production by low cost producers which will skew the supply demand balance negatively.

Iron ore prices are now siting just below the $70 mark and 2017 high which is the next key resistance. If price sustains a break of this level it will bring the 2016 high into focus. However, if price stalls at this level, the 2017 range is likely top continue to play out as price reverses lower to head back down to the support level around the October 2017 lows.