Muted Start For Metals on Back Of Last Week's Gains
The metals market is seeing a more tempered start to the week with both gold and silver futures under mild selling pressure across early European trading on Monday. Both metals saw decent buying last week though gold came off as the clear winner, gaining almost 4% across the week.
The main driver behind the shift higher in metals has been the fresh downside we’ve seen in USD. A softer December inflation reading has bolstered the view that the Fed will look to further slow the pace of its monetary tightening when it meets next in February. On the back of the .5% hike seen in December, market pricing has now swung in favour of a smaller .25% hike at the February meeting. While this view remains prevalent, USD is likely to continue lower, helping support further upside in metals. With this in mind, traders will be focusing on the next round of US data due on Wednesday with PPI and retail sales both due.
Interestingly, while gold prices have rallied sharply recently, price action in silver has been a lot choppier. The market now looks to be moving toward its first proper breakout of the year though recent two-way flows suggest a little caution around the China reopening story. While the news is broadly positive for silver demand, the lack of upside momentum in silver suggests there is some caution among traders with regard to the current covid news-flow out of China.
Looking ahead, the near-term outlook for metals looks positive with a further sell-off in USD likely to drive higher prices in both gold and silver. With this in mind, Wednesday’s US data will likely be the main catalyst for the next directional move.
Technical Views
Gold
The breakout in gold prices continues to gather pace with the market having recently moved above the 1871.04 level. The rally has stalled into a test of the 1916.34 level for now. However, with both MACD and RSI bullish, the focus is on a further push higher while price holds above the 1871.04 level, with 1873.51 the next upside target for bulls.
.png)
Silver
The rally in silver prices has been framed by a tight bullish channel off the 2022 lows. Recently, price has been stalled against the 24.0073 level. Momentum studies have reflected the loos of upside trajectory though are starting to move higher again suggesting room for a resumption of the bull trend. On a clear break above 24.0073, the next upside target for bulls is the 26.0974 level. Should price slip lower from here however, a downside break of the bull channel will turn focus to support at the 22.3205 level next.
.png)
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.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
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.