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Silver, Gold Prices May Fall on Trade Deal. XPD/USD to Rise?

Silver, Gold Prices May Fall on Trade Deal. XPD/USD to Rise?

2020-01-15 03:00:00
Dimitri Zabelin, Analyst
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Gold Prices, Silver Price Chart, Palladium Forecast, Trade Deal – TALKING POINTS

  • Silver, gold prices may decline if trade deal cools Fed easing expectations
  • Demand for anti-fiat hedges like XAU and XAG may then subsequently fall
  • Palladium prices could rise on expectations of stronger Chinese demand

Silver and gold prices may fall if the rhetoric from US and Chinese officials cools 2020 Fed easing expectations along with demand for anti-fiat hedges. This comes as geopolitical tensions between Iran and the US remain relatively tepid and have also reduced market expectations of easing form the prospect war. Palladium prices may rise in anticipation of stronger Chinese growth and greater demand for it.

Gold Price Outlook

Gold prices have recently retreated following their impressive rally after the precious metal broke above the September descending resistance channel. However, it has now since retreated a little more than four percent after reaching seven-year highs. XAU/USD recently broke below the 1551.96-1557.10 resistance-turned-support range with follow-through, opening the door to testing the floor at 1535.69, with an eye at 1517.95.

XAU/USD – Daily Chart

Chart showing gold prices

XAU/USD chart created using TradingView

Silver Price Chart

Silver prices followed a similar trajectory to gold, though it looks as if its half-way through its bearish correction as it eyes support at 17.440. Cracking this floor would open the door to testing the December 20-low at 17.181. However, if the precious metal rebounds from 17.440 with follow-through, it may speak to an underlying bullish bias and a recovery may follow.

XAG/USD – Daily Chart

Chart showing silver prices

XAD/USD chart created using TradingView

Palladium Showing Signs of Topping?

After suffering its biggest one-day dip since August 2019, palladium prices have risen almost 20 percent since December 20. The precious metal is now trading just below $2200/oz as it continues to break record-highs. Since it is in uncharted territory, it is unclear where a top might form. However, if a pullback occurs, the precious metal may look to test support at 2108.36. Cracking that could open the door to a broader decline.

XPD/USD – Daily Chart

Chart showing Palladium

XAD/USD chart created using TradingView

However, negative RSI divergence on a weekly chart shows that upside momentum is fading. While this does not necessarily precede a turn lower, it is a signal that warrants traders’ attention. Developments on the US-China trade war front will be crucial to monitor in light of the relationship Chinese growth has to palladium prices. To get more insight on commodities, tune into my weekly webinar here!

XPD/USD – Weekly Chart

Chart showing Palladium

XAD/USD chart created using TradingView

US-China Trade Deal

US and Chinese officials are expected to sign “phase 1” of their multi-sequential trade deal as part of a broad process of de-escalation as the economic conflict continues to weaken investment and the industrial sector. Significant progress on “Phase 2” will not likely be made until after the US Presidential election, according to Donald Trump. Palladium prices may rise if the commentary from officials strike an optimistic tone.

Why Do Palladium Prices Care About the Trade War?

While some tariffs are expected to remain against China, the soft détente between both sides could see job creation and investment pick up. For palladium, improved Washington-Beijing relations may provide another upside boost to the precious metal and help it continue its record-breaking rally. Palladium’s rise appears to be both demand-driven and from a supply shortage.

It is used to make catalytic converts which are used in autos as a way to reduce the expulsion of hazardous chemicals. Its price has tended to fluctuate in tandem with Chinese car exports, though now it may have more to do with a supply shortage. Most of it comes from Russia and South Africa and is mostly “extracted as a secondary product from projects which typically focus on other metals”.

PALLADIUM TRADING RESOURCES

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• Having trouble with your strategy? Here’s the #1 mistake that traders make

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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