With tensions between the US and Iran having dissipated over recent sessions, the new week has commenced with a firmly risk-on tone, seeing reduced safe-haven demand for gold. The market is now focusing on the US-Sino trade deal which is due to be signed on Thursday in Washington. Following the signing of the deal, the two sides are then expected to move onto the second phase of negotiations aimed at achieving a phase-two trade deal which many hope will finally put an end to the trade stand-off between the US and China.
Gold prices have also come under pressure from better demand for USD over recent sessions. Last week, a much stronger than expected ISM non-manufacturing reading helped lift USD. On Friday, the December NFP disappointed, coming in below expectations, though the downside was offset by the unemployment remaining at 50-year lows of 3.5%.
This week, the market will be watching the US CPI release on Tuesday; a strong reading here should help further support USD, pulling gold prices down. However, if the data comes in below expectations this could help stem the declines in gold though, in light of the better risk backdrop, gold looks poised for lower prices over the week.
Silver prices have been lower over recent sessions also, mapping the pull-back we have seen in gold. In the near term, despite the risk of further losses due to silver’s correlation with gold, the better expectations around US-Sino trade relations should offer silver some support on upgraded demand expectations as a result of better global industrial activity. Movements in USD will also be key to determining the path of silver in the near term, with reduced Fed easing expectations likely to keep USD supported. US Retail Sales on Thursday will also be on watch with both the core and headline number expected to have risen last month.
XAUUSD (Bullish above 1499.74)
XAUUSD From a technical viewpoint. Gold is still sitting just above broken 2018 highs and the monthly R1 at 1543.77. With longer-term VWAP positive, upside bias is not yet broken. However, we could see a deeper pullback to the monthly pivot at 1499.74 with momentum studies showing room for a correction also.
XAGUSD From a technical viewpoint. Silver continues to reverse the monthly R1 at 18.4686 as price action suggests further downside to come. Below here, the next area to watch for potential demand will be the cluster of support around the monthly /yearly pivot (15.5161 – 17.2889).
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