Technical Analyst, Saxo Bank
Summary: Metals are ripe for a short-term correction before the medium-term uptrends are likely to resume.
Gold could dip below 1,800, Silver below 22 and Copper could test 400 before buyers are likely to regain control
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Today's Market Quick Take from the Saxo Strategy Team
Copper seems ripe for a short-term correction. A correction that could take Copper down to test 400 i.e., 0.382 of the January move.
However, Copper is in an uptrend both short- and medium-term and buyers are likely to come back in making the possible correction a minor and short one.
Daily RSI is showing positive sentiment with no divergence indicating Copper to move higher.
Copper has retraced more than 50% of the Q2-Q3 2022 downtrend (see weekly chart) and is now back above 55 weekly SMA. Bollinger bands are expanding and RSI is currently above 60 threshold. If RSI closes the week above 60 medium-term sentiment is positive and will indicate higher Copper prices in coming weeks and months.
0.618 retracement at around 431 could be reached early in Q1 but there is room up to resistance around 447-457 .
For Copper to reverse this bullish scenario a close below 370 is needed.
Uptrend in Gold is short-term a bit stretched and the precious metal is ripe for a correction. Gold has broken the resistance at around 1,875 and could spike up above the 0.618 retracement of the Q2-Q3 2022 downtrend and above 1,900 before selling initiates a correction. A correction that could take gold down to 1,850-1,825. However, short-term intensified selling pressure could dip Gold down to 0.382 retracement of the past couple of months uptrend at around 1,783.
Daily RSI is still showing divergence and needs to close above the horizontal line to cancel that. If rejected the correction could be larger possibly down to test 1,800.
Medium-term trend is up however, supported by Bollinger bands expansion and RSI above 60. All Moving Averages are rising further underlining the medium-term bullish sentiment. A bullish sentiment that could take Gold to 1,970-2,000 going in to Q2.
Gold/Silver ratio is bouncing off strong support at around 74.57 and could move to resistance at around 82.20. A close above 82.20 and above 55 and 200 daily SMA’s is needed for further upside.
If Gold/Silver can break to close below 74 a sell-off down to 65-62 is likely.
RSI divergence explained: When an instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
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