Gold: Higher Dollar Weighs on Gold

The yellow metal fell lower this week, weighed on by a sharp rise in USD which was back in demand following the September FOMC meeting. The Fed caught markets slightly offside yesterday with a meeting that was more hawkish than many were expecting. Although rates were kept unchanged and the monetary policy statement contained little changes from the last meeting, one notable change was that the Fed announced they would begin balance sheet normalisation in October, as outlined in June. The meeting also saw the Fed upgrading third dot plot to forecast four rate hikes by year end 2018 with the longer-run median fed funds rate reaching 2.8%.

The market reaction saw a swathe of Dollar buying as traders moved to reprice the likelihood of a December rate hike, with the CME group now forecasting a 70% likelihood of December rate hike.

The sell-off in gold this week has seen price trade back down to retest the broken April and June highs around 1297 which is a key short-term pivot. If price breaks down further from here, the next key level will be a retest of the broken long-term bearish trend line which sits alongside the rising bullish trend line from last year’s lows.

Silver: Stronger US Dollar Sends Silver Lower

Silver prices tracked the move in gold this week, trading lower as the US Dollar surged higher. Silver has been in decline since mid-Summer as markets have adjusted their Dollar view and have also been weighed on by the industrial disruption caused by a raft of severe storms in the US. The total disruption is yet to be calculated but is expected to continue for more months to come as the clean-up and restore operation gets continues.

The sell-off in price this week has taken firmly back under the bearish trend line running from 2016 highs. Price is currently challenging structural support at the 16.9090 level. If price holds at this level, we could see a fresh turn higher. However, a break below this level will likely trigger larger sales as momentum players enter the market.

Copper: China Demand Concerns Fuel Sell-Off

The red metal fell sharply lower this week, extending last week’s declines as the rally in the US Dollar weighed on the price. The sell-off deepened despite the latest industry reports revealing that global refined copper was in a deficit over 2017 of around 75,000 tonnes. The report by the International Copper Study Group also noted that global mine output had fallen around 2% year over year mainly linked to the decline in production in the biggest global copper producer, Chile, which was affected by strikes at the Escondida and Codelco mines.

Data misses in China added further downside pressure this week as factory output and fixed-asset investment both undershot expectations, stoking concerns about the health of the economy. US Industrial production was also lower than expected in the wake of recent storms and there are concerns about how long it will take to recover as the clean-up operation continues.

The decline in copper this week saw price moving back below the 2015 swing high of 2.948 which is a key pivot for price. If price can reclaim this level, further upside should materialise, but if price holds below this level then a move down to the next key support at the 2.771 level (prior 2017/2016 high, broken long-term bearish trend line) should happen fairly quickly.

Iron: Weakening Fundamentals in China Weighing on Price

Iron fell sharply this week hit by the rising US Dollar and concerns around demand in China. In China, local governments have issued directives to reduce sintering output between now and March 2018 which will reduce the demand for iron ore. There were also reports this week that steel mills have been prioritising loan repayments over buying more iron ore.

Price this week fell back to challenge key support at the $69 mark which is the prior mid-April swing high. If price can hold this level iron is likely to move into a corrective ranging patter between here and resistance around the $73 mark.

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