Gold
Gold prices are currently struggling between cross-market forces as a weaker US dollar supported gold while improvements in the US-China trade landscape are leaning on gold.
Precious metals have been closely tied to the dynamic US-Sino trade environment over recent months. The collapse of talks earlier in the year drove a large increase in safe-haven flows which saw Gold prices appreciating from 1250s to 1550s between May and August. However, as Trump and Xi Jinping agreed another truce over the summer and signalled the resumption of talks, safe-haven flows were seen lower and gold prices lost some of their value. This theme has developed further over the last month as the market has grown more optimistic over the prospect of a US-China trade deal.
Following the resumption of trade talks in August, gold prices began trading lower as the market reacted to news of a potential “mini-trade deal” in the works. The 13th round of trade talks got underway at the end of last week and it seems for now, this optimism has been awarded as President Trump has announced that the two leading economies have reached “phase one” of a trade deal.
Details of the deal are still coming out, however, this preliminary agreements appears to include the indefinite postponing of a planned 5% increase in US tariffs on $250 billion of Chinese goods due to start next week. In exchange, Chinas has agreed to buy between $40billion and $50billion of US agricultural goods. Importantly, the agreement lays the foundation for a proper trade deal when negotiators meet again (expected in five to six weeks). However, there is an element of caution in markets today over reports that China is not yet ready to sign off on the deal, seeking further clarity over the fine print discussed last week. Negotiations between the two sides have typically been precarious and the market is concerned now that the deal will not be signed.
Silver
Improvement in the outlook for US-Sino trade relations could help silver prices trade higher in the coming weeks alongside additional support from a weaker US dollar. A stream of underwhelming US data prints over recent weeks has increased expectations that the Fed will cut rates when it meets next in October. Following severe weakness in manufacturing and a disappointing non-manufacturing print, lacklustre employment reports and a flat CPI reading have strengthened the view that the US economy is facing recessionary risks.
Technical & Trade Views
XAUUSD (Bullish above 15322)
XAUUSD From a technical and trade perspective. Gold prices have been lower over recent trading though longer-term VWAP is still supporting a continuation higher in line with momentum studies which flag room for a move higher also. However, the key level to watch in the short term will be the monthly R1 at 1530.26, if price holds a test of this level we could see a short-term double top taking prices lower. On the other hand, if we break above that level I will monitor a retest for long opportunities.
XAGUSD (bullish above 17.50, targeting 19.50)
XAGUSD From a technical and trade perspective. Silver prices still trading around the yearly R1 for now. While we hold here, a move back into the yearly highs remains the objective. Longer-term VWAP still supports with momentum studies showing room for further appreciation also. A test of offer into the monthly R1 at 18.7790 could see initial resistance but ultimately looking for a break higher.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!