The yellow metal has been lower over the course of this week’s trading as better risk sentiment has seen diminished safe-haven flows. Gold prices have been trending lower for a few weeks now as expectations of a US/China trade deal have been ramped up in response to recent comments. Last week, President Trump said that a trade deal was “potentially very close”. This week, Trump added further to these comments saying that the two sides are now in the very “final throes” of completing the phase-one trade deal agreed in October.
The market has been waiting on a signing date following the cancellation of the APEC meeting which was to host the deal signing. While the market is yet to receive an official signing date, the momentum in recent comments from both sides has seen an increase in expectations that a deal will be coming in the next few weeks. In terms of a date, the market is expecting that a deal will be signed before December 15th which is the date the US has penned for the next round of trade tariffs on China.
If the two sides do sign a deal ahead of this date, the implications for gold will be heavily bearish as we will likely see a strong spell of risk-on trading. Equities prices have been trading higher into record levels over recent weeks, which has kept the pressure on gold. This theme is likely to continue if a deal is signed. Of course, if a deal does not come ahead of the December 15th date and the US does announce new tariffs, upside in equities will likely reverse quickly, seeing gold supported.
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Gold prices continue to trade lower within the bearish channel which has framed the correction off year-to-date highs. The recent 1481.93 level, which has underpinned gold prices over the last three months, has now been broken. Focus is now on a test of the 1436.19 level next.
For now, the pattern can still be viewed as a corrective bull flag suggesting that upside could still materialize. If the price can break back above the1481.93 level, the key level to watch in the short term is 1522.75. This is a major long-term pivot for gold. Above here, the focus will be on a move back up to the recent 1554.69 level.
Silver prices have broken from their recent correlation with gold to trade higher across the week. On the back of the heavy sell-off seen last week, silver this week posted a mild recovery as the rally in equities leaned support. Expectations of a US/China trade are also helping support silver here due to expectations of increased industrial demand.
The outlook for the US dollar is important here also. The painting back of Fed easing expectations has seen USD supported over recent weeks which has offset some of the upside in silver.
The recent breakdown in silver has seen price breaking down below the key 17.3408 level as the bearish channel develops further. While this channel can still be viewed as a corrective bull flag structure, for now, bulls will need to see price quickly back above that broken support.
Below 17.3408, the next major support level is down at 16.2130. This also holds the retest of the broken long term bearish trend line. To the topside, the 18.6397 level remains the key marker to break.