Weekly Commodities Wrap: Resurgent US Dollar Sends Metals Lower

Gold: Higher Dollar Weighs on Gold

The yellow metal fell lower this week, weighed on by a sharp rise in USD which was back in demand following the September FOMC meeting. The Fed caught markets slightly offside yesterday with a meeting that was more hawkish than many were expecting. Although rates were kept unchanged and the monetary policy statement contained little changes from the last meeting, one notable change was that the Fed announced they would begin balance sheet normalization in October, as outlined in June. The meeting also saw the Fed upgrading third dot plot to forecast four rate hikes by year end 2018 with the longer-run median fed funds rate reaching 2.8%.

Welder

The market reaction saw a swathe of Dollar buying as traders moved to reprice the likelihood of a December rate hike, with the CME group now forecasting a 70% likelihood of December rate hike.

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Gold chart

The sell-off in gold this week has seen price trade back down to retest the broken April and June highs around 1297 which is a key short-term pivot. If price breaks down further from here, the next key level will be a retest of the broken long-term bearish trend line which sits alongside the rising bullish trend line from last year’s lows.

Silver: Stronger US Dollar Sends Silver Lower

Silver prices tracked the move in gold this week, trading lower as the US Dollar surged higher. Silver has been in decline since mid-Summer as markets have adjusted their Dollar view and have also been weighed on by the industrial disruption caused by a raft of severe storms in the US. The total disruption is yet to be calculated but is expected to continue for more months to come as the clean-up and restore operation gets continues.

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Silver chart

The sell-off in price this week has taken firmly back under the bearish trend line running from 2016 highs. Price is currently challenging structural support at the 16.9090 level. If price holds at this level, we could see a fresh turn higher. However, a break below this level will likely trigger larger sales as momentum players enter the market.

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