Metal market wrap: Gold gives back some profits, but risk sentiment on knife's edge

  • The gold market was taking some profits off the table on Tuesday heading into a national holiday for North American markets today, Wednesday, in remembrance of President George Herbert Walker Bush.
  • Gold futures headed lower on Wednesday while spot prices recovered in European markets only to run into supply in an illiquid Northern American session. 
  • Lasting cessation of hostilities between President Donald Trump and Chinese President Xi Jinping likely to weigh on stock price and support the greenback which should be backed on year-end and seasonal repatriation flows. 

While commodity markets were open, trade was somewhat thinner today; This was due to a holiday in remembrance of President George Herbert Walker Bush, who died Nov. 30 at the age of 94, who is being honoured in memory at a National Cathedral memorial service in Washington on Wednesday, which has been designated a national day of mourning by President Donald Trump. Commodities markets were operating per usual, but other U.S.-based risk markets were not, likely adding volatility in the remaining open markets. 

Precious metals

Gold and silver were losing out to profit-taking following pre US holiday in markets on Tuesday when US stocks rolled over. Price action was rough around the edges due to global trade concerns following an ambiguous handshake deal between US President Donald Trump and Chinese President Xi Jinping. Their 90-day ceasefire has left more questions than answers about the future trade relations between the two largest economies of the world.

Following the highest finish for gold prices since July 25, gold futures fell by $4, or 0.3%, to settle at $1,242.60/oz. Spot gold travelled between a European low of 1233.24/39.51. March silver dropped 5.6cents, or 0.4%, to close at $14.582/oz. Silver had ended 1% higher the prior day. January platinum lost 0.3% to $802/oz.

"A weaker US dollar in combination with lower rates, a flattening yield curve, stronger EM currencies and continued political uncertainty across the pond have kept gold and silver well supported above the $1200/oz and $14.14/oz downside levels," a group of analysts at TD Securities explained, adding, "Meanwhile, PGMs continue their divergence as platinum risks seeing the addition of fresh shorts below $793/oz, while palladium continues to fire longs on all signal as the metal churns higher, now surpassing gold."

Base Metals

March copper added 0.5% to $2.774lb, "reverting closer to the range that would trigger additional CTA shorts, should prices revert to the $6000/t level", the analysts at TD Securities, (TDS), noted:

"For now, the remaining base metals remain far off any key levels, but the next ninety days are sure to see a whirlwind of trade headline news, which could bring additional levels on both the upside and downside into play. Yesterday's short covering trigger in lead will be reversed unless prices can confirm increasing momentum above $2,020/t today."

Risks for metal markets on the horizon

Factors that could impact demand for gold are a flight to safety or away from the dollar. Brexit could be a catastrophe waiting to happen for financial and commodity markets which could benefit gold prices and analysts at Standard Chartered Bank said, You ain’t seen nothing yet. "On 11 December, the UK government will hold a ‘meaningful vote’ in parliament on its Brexit deal. As it stands, it looks as if it will lose the vote," notes Standard Chartered economist Christopher Graham.

This Friday brings us another key risk in US jobs data which will impact the greenback. "The jobs report is shaping up to be hawkish across the board. We look for payrolls to revert to trend but remain strong at 215k in line with surveys. The unemployment rate should stabilize at 3.7%, but risks skew to a further drop. Finally, wages have scope for a strong 0.3% print given the reference week and Amazon wage hikes, leaving y/y growth at a new high of 3.2%," analysts at TDS look for. 

Technical levels

Gold:

Gold is consolidated at the top of the daily Bollinger bank range with the price horizontal over that cluster of moving averages on both the 4-Hour and daily candlesticks. Given where it stands, with the 4hr ATR tailing off showing a lack of trend and RSI now slightly less bullish having turned below 70, the price may be ripe for some further profit taking should the bulls be unable to hold above daily pivot line at 1237 which is tucked in just below the 38.2% Fibo target area at 1,238.06. A break there will send bulls up to challenge of October 25th’s peak of 1,243, although resistance remains at the 200-day SMA near 1,258 could be a healthy level of resistance ahead of the 50% Fibo level at 1,262. On a break of the double bottom, 26/27th Nov lows at 1211 with the confluence of the 100 D SMA,  the double-bottom lows of 1,180 would come into jeopardy. 

Silver:

The monthly doji could represent a bullish corrective outlook for the longterm picture, but for the meanwhile, the price of Silver is consolidating on the daily chart. It had spiked to the 100-D SMA and top of the Bollinger band resistance where the price was rejected and sent back below the pivot on Wednesday at 14.55. There is no clear sign of trend according to the ATR and RSI is flat having turned below 70 in the prior day's trade. The 200-4hr support is located at 14.44 that meets the positive sloping 21 4hr SMA of which if gives way, the downside is open to S1 at 14.41 and S2 at 14.28 with the principal objective being a close of the gap located at 14.20, This guards next support situated at 13.90 - as being the November low while crucial resistance is at 14.79 - as being the 23.6.% Fibo retracement 2018 downtrend.

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