News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Real Time News
  • It’s important for traders to be familiar with FX spreads as they are the primary cost of trading currencies. Understand a pair's spread here: https://t.co/zEEUHZBx7g https://t.co/jZHcyAZ5SU
  • Further your forex knowledge and gain insights from our expert analysts on EUR with our free guide, available today: https://t.co/XtydfV5wS6 https://t.co/Iw9haaHAnn
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sr63f https://t.co/raO3gCGqQ6
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here: https://t.co/8A1QhwMVKo https://t.co/rWVlBs6H3c
  • The update to the US Consumer Price Index (CPI) is likely to sway the US Dollar during the Federal Reserve’s blackout period as the central bank braces for a transitory rise in inflation. Get your weekly $USD forecast from @DavidJSong here: https://t.co/JTuP7CLlyi https://t.co/tOvqn3Gdpc
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/s5dn4ZKnku
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACyvdZ https://t.co/6VjW5FEiQW
  • Global stocks bounce back from recent pullback as key resistance levels lie ahead. Get your weekly equities forecast from @HathornSabin here: https://t.co/wXSWo1JygD https://t.co/vWVaSEQTXT
  • Do you know how to properly Identify a double top formation? Double tops can enhance technical analysis when trading both forex or stocks, making the pattern highly versatile in nature. Learn more about the double top formation here: https://t.co/t9FlspUVZz https://t.co/9kfBu04auM
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5ddzFV https://t.co/8GJ6OQYgnW
Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

Margaret Yang, CFA, Strategist

GOLD, COPPER PRICE OUTLOOK:

  • Gold prices fell from 8-week highs as the US Dollar index rebounds
  • The two Georgia runoff races are very close, creating uncertainty that markets tend to dislike
  • A string of strong manufacturing PMI readings and demand from China may underpin copper prices
Advertisement

Gold prices erased earlier gains and fell from 8-week highs as the Georgia Senate runoffs ran into tight races in Asia-Pacific mid-day trading. Similarly, copper prices suffered a minor pullback after hitting a 7-year high on Tuesday, backed by stronger US ISM Manufacturing PMI readings and solid demand from China.

The US Dollar index rebounded from a two-and-half year low as Democratic leads in the two races initially narrowed, dampening the prospect for a Democratic sweep that may enact President-elect Joe Biden’s legislative priorities including fiscal and infrastructure spending. Uncertainties surrounding the runoff election results created much uncertainty that markets tend to dislike, resulting in a broad ‘risk-off’ sentiment and heightened volatility.

In the medium term, however, election results may again prove to be a short-term catalyst for precious and base metal prices amid a cyclical recovery in global demand into 2021. This may underpin a medium- to long-term rally in base metal prices, including copper, nickel and iron ore. Purchasing managers indexes showed continues expansion in world’s largest economies including the US, EU, China and the most part of the ASEAN (Association of Southeast Asian Nations) as shown in the chart below. The US ISM Manufacturing reading came in at 60.7 versus forecast of 56.6, marking its highest reading seen since August 2018.

Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

Base metal prices are very sensitive to the movement of the US Dollar, with copper, nickel and iron ores tending to move in opposite to the Greenback. Similar to gold, copper prices and the DXY US Dollar Index historically exhibit a negative relationship, with a correlation coefficient of -0.95 over the past 12 months (chart below). The commodity-linked Australian Dollar has shown strong positive correlation with metal and mineral fuel prices as they account for a large portion of Australia’s total exports.

CME Copper vs. DXY US Dollar Index – 12 Months

Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

Source: Bloomberg, DailyFX

Gold prices have likely broken above a “Descending Channel” and entered into a bullish channel (chart below). Prices have formed consecutive higher highs and lows in December– an encouraging pattern that points to a potential medium-term trend reversal. Piercing through a key chart resistance of US$ 1,910 (the 61.8% Fibonacci retracement) this week has likely opened the door for further upside potential with an eye on US$ 1,940 (50% Fibonacci retracement) and then US$ 1,973 (38.2% retracement).

Gold PriceDaily Chart

Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

The LME copper prices appear to be riding an ascending trend with the 20-, 50- and 100-Day Simple Moving Averaeg (SMA) lines lining up higher. Prices are hitting the uppper Bollinger Band and thus are susceptible to a technical correction. A firm break above the immediate 76.4% Fibonacci exension at 7,955 may open the room for further upside potential with an eye on 8,488 (100% extension). A pullback from here may lead to a test of 7,839 (20-Day SMA) for support.

Copper PriceDaily Chart

Gold, Copper Prices Retreat amid Tight Races in Georgia's Senate Runoff Election

Chart by IG

--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

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

DISCLOSURES