Metals Weaken As Risk Sentiment Rebounds
Metals prices have been seen lightly bid at the start of the week, though still down sharply off recent highs. Gold prices are currently down around 7.2% from the multi-year highs printed earlier in the month. Risk sentiment has rebounded firmly over the last fortnight as markets begin, cautiously, to anticipate a potential ceasefire on the horizon for Russia and Ukraine. Peace talks between the two sides have bene progressing and, while the violence continues for now, current market action suggests the view that a resolution is coming.
In the meantime, traders appear to be taking a reduced view on the risks around the conflict given the reversal in market moves we have seen. Gold and silver have both corrected sharply amidst the rebound in risk assets. A hawkish FOMC meeting last week has also dampened the near-term outlook for metals. With the Fed upgrading its rate path projections, while citing upside risks in the outlook, metals prices look likely to trade lower as we head towards summer, particularly if Russia and Ukraine can agree an end to the violence.
Despite the current pull back in metals, however, there are clear upside risks which need to be acknowledged. Should the violence in Ukraine intensify or if peace talks are abandoned, this would clearly strike a blow to risk sentiment. Additionally, if the risks of any other countries being dragged into the conflict increase, this would likely see metals sharply higher on increased safe haven flows.
Technical Views
Gold
The correction in gold has seen the market trading back inside the broken bull channel. Price is currently sitting on support at the 1919.92 level, the May ’21 highs. While this level holds as support, the focus is on a further push higher. However, with both MACD and RSI having turned lower here, the risk is of a deeper correction towards the 1871.10 level next, with the bull channel low beneath.
Silver
The correction lower in silver has not been as pronounced as we’ve seen in gold. Price has fallen back from the test of the 26.5711 level, sitting back below the 25.5384 level for now. While below here, the focus is on a further push lower towards the 24.0073 level next, in line with bearish MACD and RSI readings.
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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.