Precious metals ease back but outlook remains supportive

Thanks to further improvement in risk appetite, precious metals were easing back after yesterday’s big rally

Thanks to further improvement in risk appetite, precious metals were easing back after yesterday’s big rally that saw gold surged through $1500 for the first time in six years and silver took out $17.00. However, this could just be a hiccup as the fundamental backdrop remains supportive for precious metals.

The bond market sell-off has paused for breath, allowing yields to bounce a little. The slightly firmer yields have helped to undermine the noninterest-bearing metals today. Also weighing on prices is the rebound in stock markets, reducing the need for safe-haven precious metals.

However, nothing has changed fundamentally with regards to the US-China situation, or the global economic outlook with today’s positive trade figures from China coming in on the back of very weak German industrial data from the day before. Although the probabilities of a further 25 basis point cut in the Fed’s September meeting as implied by Fed fund futures may have fallen from as much as 85%, the markets are still pricing in a 76.5% chance of a cut. Further rate cuts should help to boost precious metals.

From a purely technical point of view, silver’s pullback today comes as no surprise given the extent of yesterday’s outsized-rally. The metal remains in a bullish trend for now, so we continue to prefer looking for bullish signs to emerge around support than bearish near resistance. Key support comes in around $16.65, or slightly lower. We will maintain out bullish view on the metal until and unless it forms a key reversal.


Source: eSignal and City Index

Related Articles

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.