The US-Sino trade deal outlook remains the key factor affecting metals prices this week. Over the last month, increased expectations of a forthcoming deal have helped lean on gold prices, due to the ongoing rally in global equities benchmarks. The slide in gold has seen prices remaining below the $1500 handle over the last few months.
However, the landscape around the negotiations (which are ongoing) is changeable and there is still upside risk for gold prices. If a deal is not agreed in the next fortnight, the US has said that further tariffs will be applied to China. The market is fearful that is these new tariffs are applied, China will retaliate, leading to a worsening of global economic conditions. Such an outcome would be supportive for gold, however, which would likely trade higher on a flight-to-safety move.
Gold would likely derive further support in such circumstances from a weaker Dollar. The Federal Reserve has said that it plans to keep rates on hold in the near term, though will monitor data and conditions. If the trade talks collapsed, this would likely crate the need for further easing from the Fed, which could help foster further demand for gold.
The outlook, for now, however, remains bearish for gold. Investors continue to see a trade deal being agreed ahead of the December 15th date, avoiding the need for further tariffs. If the deal is agreed, gold prices will likely break down further.
Silver prices have been a little more resilient than gold over recent weeks. While recent weekly closes have seen price barely in the green, silver recorded a third consecutive positive week last week. However, on the back of the heavy sales seen over the first week of November, the outlook remains vulnerable to further losses. The prospect of a US-Sino trade deal is helping offset some of the downside in silver, which is leaned on further by a stronger Dollar. US Manufacturing data will be key this week. The downturn in manufacturing over the year has seem reduced industrial demand for silver, though this could change if a US-Sino trade deal is agreed. Global manufacturing PMIs have been trending lower this year as a result of the trade war and with uncertainty still elevated, the risk of a further move lower is noted.
Technical & Trade Views
XAUUSD (Bearish, below 1475.12)
XAUUSD From a technical and trade perspective. Gold prices continue to look bearish here and with longer-term VWAP negative, the near-term bias remains negative for gold. Price is sitting below the monthly pivot at 1475.12 for now, while below here, a move down to 1378.71 could be seen.
XAGUSD (Bearish, below 17.2958)
XAGUSD From a technical and trade perspective. Silver prices remain flat just below the 17.0000 handle. With longer-term VWAP negative, the bias remains bearish in the near term for silver while price holds below the monthly pivot at 17.2958. In terms of next levels, the yearly pivot at 15.6951 could see some interim bids, though, while price stays below the 17.1753 level, lower prices are likely.
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