Commodity Talk: How to trade precious metals this week

Q. Gold and silver prices fell last week, why is that? Also, downbeat US housing data came out too. How does it fit into the picture? What will be the trend this week?

Naveen Mathur:

The fall in precious metals was seen largely on Friday partly due to profit booking moves on mildly upbeat US PMI numbers for last month but the prices still ended up on a weekly average basis.

New housing construction data released last week showed that it dropped to the lowest level in nearly four years in May. This combined with tepid retail sales in last month and rising initial jobless claims suggest economic activities have remained moderate in the second quarter. Geopolitical issues also continue, with Israel indicating to continue to target Hamas while may not back the cease-fire deal as was proposed by the US several weeks ago.

Despite Friday’s mildly higher print in PMIs, markets continue to pin hopes on a September rate cut from the Fed. According to the CME’s FedWatch Tool, rate traders are still pricing in around 65% odds of at least a quarter-point rate trim at the Federal Open Market Committee’s (FOMC) September 18 rate decision.

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Q. What about the dollar index? Will there be volatility this week?

Naveen Mathur:

The US dollar index surged to two-month highs on bullish economic data following mildly positive PMI data indicating moderate economic growth and cooling price pressures. Globally, the US Dollar is on the front foot due to weakness seen in the Euro as uncertainties persist over election outcomes in France’s elections due next week. US yields are stable, waiting for the next data set, but reflecting the possibility of two cuts this year. This week’s US PCE inflation is a critical data point, in the context of signs of moderating labor markets. It may show continued disinflationary forces, adding to the case for Fed rate cuts.

Q. ⁠How to go about gold and silver this week?

Naveen Mathur:

With loads of data points including durable goods orders, US GDP, and Core PCE Index, any 1-2 dips in prices could remain a buying opportunity given moderating economic activities keeping rate cut hopes alive.

Q. Which levels to watch out for this week?

Naveen Mathur:

Sure, for gold – a strong support level of 71200, and 72900 level is for a strong resistance level are there. Buy on dips for gold, silver, and crude oil. For Natural Gas, Copper – it is sell on the rise. Below are the levels to watch out:

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