Metals Higher As Markets Fall On War Fears
The metals complex is starting the week in quieter fashion following the big moves seen on Friday as gold prices broke out to their highest levels since November 2021. The move was primarily seen in response to the drop in equities prices as risk sentiment continues to weaken over fears of an imminent Russian invasion of Ukraine. Over recent days, news headlines on the matter have deteriorated with a string of reports citing US intelligence warnings that an invasion is imminent this week. These fears were further stoked by a press conference held by the UK PM ahead of the weekend. While Russia continues to push back against these claims, accusing the west of attempting to start a war, investors are clearly concerned. With this in mind, the main focus this week is likely to be on incoming headlines as we approach Wednesday, which some media reports claim will be the day of the invasion.
Away from the Russia/Ukraine situation, the rally in metals has been somewhat curtailed by the rally in USD. With recent labour market and CPI data for January coming in strong, expectations are well primed ahead of the March FOMC, with the market now looking for reasons to expect the Fed to upgrade its rate path outlook over the year ahead. Looking ahead this week, the next key US data release will be January retail sales, due on Wednesday. A further strong reading should give yet more support to the Dollar, limiting upside in metals. However, risk driven flows are likely to take centre stage this week, particularly if any conflict between Russia and Ukrainian militaries occurs.
Technical Views
Gold
The recent rally off the bull channel low has seen gold prices breaking out above the 1826.71 level this week. With both MACD and RSI turned bullish here, the focus is on a continuation higher near-term, with a break of the 1871.04 level the next focus for bulls. Above there, the 1919.92 level and bull channel top will be the next key resistance area. To the downside, any break of the channel low will see 1763.88 as the next key support level.
Silver
The rally off the 22.3205 lows has seen price trading back up to test the top of the triangle pattern, just ahead of the 24.0073 level resistance. With both MACD and RSI bullish here, the focus is on a breakout above this region, targeting a run up to the 25.5384 area next. To the downside, the key support remains the 22.3205 – 21.4525 area, where we see the triangle low coming in.
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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.