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Gold and Silver Aim Higher As US Dollar's Slumber Continues

Gold and Silver Aim Higher As US Dollar's Slumber Continues

2014-05-19 09:31:00
David de Ferranti, Currency Analyst
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Talking Points

  • US Dollar slump affords gold and silver some breathing room
  • Crude oil exposed to souring sentiment as US equities pullback
  • Fading geopolitical risks may sap safe-haven demand for the precious metals

Gold and silver are pushing higher in early European trading as the greenback fails to gain traction alongside a slump in US 10 year yields. A light economic docket in the session ahead may leave the US Dollar uninspired by a lack of positive news-flow, which may afford the precious metals some further gains. Meanwhile, crude oil may be exposed to a pullback on broad-based risk aversion as investors question the sustainability of present levels for US equity benchmarks.

US Dollar Slump Affords Gold Some Breathing Room

A persistently weak greenback has likely underpinned elevated levels for the precious metals in recent trading. A timid stance from Fed officials on potential rate rises over recent weeks has likely put pressure on US 10 yields, with the benchmark lending rate sinking to the lowest level since September 2013 on Friday. This has detracted from the US Dollar’s attractiveness from a yield standpoint, and has likely helped support gold and silver prices. Until we see a more hawkish stance from FOMC officials, the greenback may continue to flounder, which in turn may grant a further rise in prices for the precious metals.

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Get more on the gold outlook for the week ahead here.

Crude Oil Vulnerable To Souring Sentiment

Supply-side factors in the US crude oil market continue to cast a bearish light on WTI. However, additional pressure may be put on prices this week based on the influence of risk-trends on the growth-sensitive commodity. The pullback from the record highs last week for US equity benchmarks (proxies for risk-sentiment) suggests some concerns amongst investors about the lofty levels. A continued retreat may stand to spill over into the commodities which would weigh on crude oil prices.

Ebbing Ukrainian Tensions

The ongoing turmoil in Eastern Europe remains on the radar in the commodities space. Heightened geopolitical tensions in the region have likely provided some support to gold and silver prices based on safe-haven demand from traders. Additionally, fears over potential supply disruptions for Russian commodity exports may have helped crude oil and natural gas prices of-late. However, in the absence of a further escalation of conflict, and as the West refrains from sanctions on Russian commodity exports, gold and crude oil may be exposed to declines on an unwinding of fear-driven positioning.

CRUDE OIL TECHNICAL ANALYSIS

Sentiment may be shifting for crude oil following a failure to breach the 102.30 mark in recent trading. The formation of an Evening Star candlestick pattern near the resistance level suggests the bears may be looking to stage a return. However, with prices above the 20 SMA and a positive reading from the rate of change indicator a mixed technical bias is offered.

Crude Oil: Recovery Stalls At Nearby Resistance

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

GOLD TECHNICAL ANALYSIS

Gold’s recent range between $1,277 and $1,305 persists which may afford short-term range-trading opportunities on either side of the narrow corridor. A lack of momentum signaled by the Rate of Change indicator, as well as low volatility levels (reflected by the ATR) and several Doji formations suggest the consolidation may continue.

The DailyFX Speculative Sentiment Index suggests a mixed bias for gold based on trader positioning.

Gold: Dojis Highlight Trader Indecision

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

SILVER TECHNICAL ANALYSIS

The Bearish Engulfingcandlestick pattern on the daily chart for silver is warning of a pullback for the precious metal to critical support at $19.00.

Silver: Eyes The Critical $19.00 Handle

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

COPPER TECHNICAL ANALYSIS

The copper bulls have regained their grip on prices following some signs of hesitation near resistance-turned-support at $3.149. With the base metal remaining in an uptrend alongside building positive momentum, longs are preferred with a target offered by the 61.8% Fib retracement level near $3.213.

Copper: Bulls Return As Uptrend Persists

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

PALLADIUM TECHNICAL ANALYSIS

Palladium has staged a false breakout with prices pulling back below the $815 handle. While a Bearish Engulfing pattern has formed on the daily, it may find little follow-through, given that prices remain within an ascending trend channel. A test of the ascending trendline would be seen as an opportunity to enter new long positions.

Palladium: Pullback May Offer New Long Opportunities

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

PLATINUM TECHNICAL ANALYSIS

Platinum is at a critical juncture as the precious metal retests its descending trendline from the April 2013 high. As is often the case, a retest helps confirm the original breakout and this instance validation would leave a preference for longs. However, a Dark Cloud Cover pattern near $1,486 is warning of a continued pullback.

Platinum: Retest Of Trendline Offers Make-Or-Break Moment

Gold and Silver Aim Higher As US Dollar's Slumber Continues

Daily Chart - Created Using FXCM Marketscope 2.0

Written by David de Ferranti, Currency Analyst, DailyFX

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

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