• Gold price extends Thursday’s bullish breakout ahead of US sentiment data on Friday.
• The US Dollar keeps the red with Treasury bond yields on renewed bets of outsized Fed rate cut bets.
• Gold price achieves a symmetrical triangle target at $2,560, with more upside likely as the RSI stays bullish.

Gold price is sitting at the highest level on record near $2,570, with buyers contemplating the next move amid sustained weakness in the US Dollar (USD) and the US Treasury bond yields. Traders now look forward to the US Michigan preliminary Consumer Sentiment data for fresh directives.

Gold price capitalizes on increased bets jumbo Fed rate cut

Gold price extended the early bounce on Thursday, as the tide turned in favor of buyers following the release of the US Producers Price Index (PPI) and Jobless Claims data, which reinforced bets of an outsized interest rate cut by the US Federal Reserve (Fed) interest rate cut next week.

The PPI increased 0.2% MoM in August, the US Bureau of Labor Statistics (BLS) said Thursday, beating the expected 0.1% increase. Excluding food and energy, PPI rose 0.3%, slightly hotter than the 0.2% consensus estimate. Annually, headline PPI rose 1.7%. Excluding food, energy and trade, the annual rate was 3.3%.

Meanwhile, the  Initial Jobless Claims came in at 230,000 for the week ended Sept. 7, up 2,000 from the previous period while aligning with the forecast. Dismal US data combined with the Wall Street Journal (WSJ) article on the Fed’s rate cut dilemma brought back bets for a jumbo cut at the September meeting.

The US Dollar snapped its recovery mode and fell steeply on dovish Fed expectations, tracking the sell-off in the US Treasury bond yields.

The USD also bore the brunt of the resurgent demand for the Euro after the European Central Bank (ECB) on Thursday cut rates but President Christine Lagarde poured cold water on the expectations for another cut next month. The Hawkish cut by the ECB sent EUR/USD higher at the expense of the Greenback.

These factors added to the Gold price rebound, driving the bright metal to a fresh lifetime high of $2,560 on Thursday.

In Friday’s trading so far, Gold price witnessed a fresh leg higher and renewed record highs at $2,568, as Asian traders hit their desks and reacted to the overnight optimism surrounding the renewed dovish bets surrounding the Fed announcements next week.

However, buyers are catching their breath at the moment, as they turn slightly cautious heading into the weekend. Markets could resort to repositioning ahead of next week’s Fed policy meeting, fuelling a corrective decline in Gold price. Also, the end-of-the-week flows could play a pivotal role in the Gold price action alongside the release of the US Consumer Sentiment and Inflation Expectations data.  

Gold price technical analysis: Daily chart

As observed on the daily chart, Gold price finally yielded a breakout after closing Thursday above the upper boundary of the three-week-old trading range, pegged at the previous record high of $2,532.

Meanwhile, the 21-day Simple Moving Average (SMA), now at $2,513, continued to offer strong support to Gold buyers.

 With the range breakout in play, Gold price finally achieved the one-and-a-half-month-old symmetrical triangle target, measured at $2,560.

Despite the relentless rise, the 14-day Relative Strength Index (RSI) still holds in the bullish territory, with room for more upside until it prods the overbought boundary. The RSI indicator currently trades near 66.50.

If Gold price extends its bullish momentum, the next upside hurdle is seen at the $2,600 level, above which the $2,650 psychological level will be tested.

Should a correction ensue, the initial support is seen at the previous record high of $2,532, below which the 21-day SMA at $2,513 will be put to the test.

A sustained break below the latter is needed to challenge the key $2,500 threshold.

Double Bottom Breakout Triggers Above 2.30

Today’s advance completed a 38.2% Fibonacci retracement at 2.37, with the next price zone target zone from 2.47 to 2.54. The higher price level is the standard target for a rising ABCD pattern (purple). Included within the price range is the 50% retracement at 2.52. The double bottom pattern indicates a potential target from the breakout at 2.72.

That target is derived by calculating the measuring objective of the pattern. Two other targets are nearby creating a price range from 2.65 to 2.72. A 127.2% extended target for the rising ABCD pattern points to 2.65, and the 61.8% Fibonacci retracement is at 2.67. Moreover, a bullish reversal of the prior decline is further confirmed today as the 2.30 level was a swing high that was part of the downtrend price structure.

Reclaims 200-Day MA

Given the decisive breakout above the 200-Day MA today, and a likely strong close, the 200-Day line is key support during pullbacks. It is now 2.25. Of course, a test of support at the 2.30 breakout level (also a weekly high) is the first area to watch for support on weakness.

Top Trendline May Eventually Be Tested

Since natural gas has triggered a double bottom breakout and it is back above each of the moving average, there is the potential that it eventually retests resistance around the top downtrend line. That line is at the top of a large symmetrical triangle pattern. An internal symmetrical triangle is indicated by the internal uptrend line connecting the recent swing low (A). Once support is tested on one side of the pattern there is the possibility to eventually reach the other side. Currently, the 78.6% retracement at 2.89 can be used as a rough proxy for the top trendline.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,548.15

• The European Central Bank trimmed interest rates, repeated it will remain data-dependant.
• The United States Producer Price Index rose by more than anticipated MoM in August.
• XAU/USD eased just modestly from a fresh all-time high, maintains its bullish strength.

Spot Gold surged to a fresh all-time high of $2,555.11 on Thursday, following the European Central Bank (ECB) monetary policy announcement and some relevant macroeconomic figures from the United States (US). Still, the news had a limited impact across the FX board, as they lacked a surprise factor. Nevertheless, XAU/USD soared, finding additional support on the poor performance of US indexes after Wall Street’s opening.

On the one hand, the ECB decided to reduce the deposit facility rate by 25 basis points (bps) to 3.5%, as widely anticipated. However, the interest rate on the main refinancing operations was cut by 60 bps to 3.65%, while the interest rate on the marginal lending facility was also trimmed by 60 bps to 3.9% from 4.5% previously. The decision could be seen as dovish, but it fell short of having a negative impact on the Euro.

On the other hand, the US reported that the August Producer Price Index (PPI)h rose by 1.7% from a year earlier, below the 1.8% expected and the previous 2.1%. On a monthly basis, the PPI was up by 0.2%, slightly above the 0.1% anticipated.  Additionally, Initial Jobless Claims for the week ended September 6 met expectations by printing at 230K. The figures were supportive of a Federal Reserve (Fed) interest rate cut next week but not enough to revive hopes for an aggressive 50 bps reduction. The US Dollar turned lower afterwards.

In the meantime, Asian and European equities edged higher, compliments to a firm recovery in the tech sector. US indexes, however, were unable to follow the positive lead, with the Dow Jones Industrial Average and the S&P500 posting modest intraday losses.

XAU/USD short-term technical outlook  

XAU/USD trades a handful of $ below the aforementioned record high, retaining its bullish stance. The daily chart shows it met buyers around a bullish 20 Simple Moving Average (SMA) for the sixth consecutive day, while the 100 and 200 SMAs keep heading north, far below the shorter one. Technical indicators, in the meantime, picked up bullish momentum with plenty of room to extend gains.

The 4-hour chart for the XAU/USD pair shows the risk skews to the upside. The 20 SMA is picking up above a flat 100 SMA over $30 below the current level, while the 200 SMA grinds north well below the other two. Finally, technical indicators maintain their sharp upward slopes, with the Relative Strength Index (RSI) indicator approaching overbought readings. Nevertheless, there are no signs of bullish exhaustion, with buyers likely adding on pullbacks and aiming for higher highs.

Support levels: 2,535.10 2,521.85 2,507.20

Resistance levels:  2,555.10 2,570.00 2,585.00

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• Silver price moves higher towards $29 even though traders pare Fed large rate cut bets.
• The US Dollar and bond yields rise as the US CPI data for August shows signs of stickiness.
• Investors await the US PPI and the Initial Jobless Claims data.

Silver price (XAG/USD) edges higher towards the crucial resistance of $29.00 in Thursday’s European session. The white metal rises slightly despite investors seem confident that the Federal Reserve (Fed) will start reducing interest rates gradually by 25 basis points (bps) to 5.00%-5.25% this month.

Market speculation for the Fed starting to reduce its key borrowing rates aggressively has diminished significantly as Wednesday’s United States (US) Consumer Price Index (CPI) data for August showed signs of stickiness in inflationary pressures. Annual US core inflation – which excludes volatile food and energy prices – rose in line with estimates and the prior release of 3.2%.

Declining market expectation for Fed interest rate cut by 50 bps has uplifted the US Dollar (USD) and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 101.70. 10-year US Treasury yields rise to 3.67%. Generally, higher yields on interest-bearing assets weigh on the Silver price, given that they increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. But, in this case, the Silver price remains firm.

Going forward, investors will focus on the US Producer Price Index (PPI) data for August, which will be published at 12:30 GMT. The core PPI is estimated to have accelerated further. At the same time, investors will also focus on the US Initial Jobless Claims data for the week ending September 6.

The significance of the jobless claims data has increased in last few weeks as recent comments from a string of Fed officials signal that the central bank has become more concerned over preventing job losses.

Silver technical analysis

Silver price trades in a limited range of $27.70-$29.20 from more than a week. The upside in the white metal remains restricted by the 200-period Exponential Moving Average (EMA), which trades around $28.80.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, exhibiting a sideways trend.

Silver four-hour chart

(This story was corrected on September 12 at 11:30 GMT to say that Silver price trades in a limited range of $27.70-$29.20, not $27.70-$28.20.)

• Gold price turns positive while above $2,500, as US PPI and Jobless Claims data loom.
• The US Dollar holds rebound alongside Treasury bond yields on fading outsized Fed rate cut bets.
• Gold price appears primed for a range breakout, with buyers still hopeful amid a bullish RSI.

Gold price is making a minor recovery attempt early Thursday, as buyers stay hopeful above $2,500. With the US Consumer Price Index (CPI) data out of the way, the focus now turns toward the US Producers Price Index (PPI) and Jobless Claims data for fresh trading incentives.

Gold price looks to US PPI data for fresh impetus

Gold traders bide time and assess the critical US CPI inflation data released on Wednesday, which poured cold water on increased bets of an outsized interest rate cut by the US Federal Reserve (Fed) interest rate cut next week.

Data published by the US Bureau of Labour Statics (BLS) showed Wednesday that the CPI rose 0.2% MoM in August, aligning with the expected 0.2% print. US August core CPI jumped 0.3% MoM vs. estimates of 0.2%. The headline annual CPI inflation ticked a tad lower to 2.5% in August while the core CPI grew 3.2% YoY versus forecasts of 3.2%.

Despite the headline annual CPI figure cooling off, the sticky monthly and yearly core figures prompted markets to rule out an outsized Fed rate cut this month. Markets are currently pricing in an 85% chance of a 25 basis points (bps) cut, compared to 71% before the data, the CME Group’s FedWatch tool shows.

Gold price tested the key $2,530 topside barrier before witnessing a steep decline on the sticky US inflation data, which triggered a fresh recovery rally in the US Dollar (USD) and the US Treasury bond yields.

Despite the pullback, Gold price managed to defend the critical short-term support level near $2,505, keeping it in its three-week-long consolidative range.

In Thursday’s trading so far, Gold buyers seem to have fought back control but lack bullish conviction amid persistent US Dollar strength and an upbeat market mood. However, Gold price could draw support from gains in other precious metals and industrial metals, including Palladium, Nickel, etc, in the face of potential export curbs under consideration from Russia.

Also, traders look to a fresh batch of top-tier US economic data due later on Thursday for further hints on the Fed’s policy, eventually impacting the value of the US Dollar and Gold price.

Gold price technical analysis: Daily chart

Nothing seems to have changed for Gold price from a short-term technical perspective. Buyers continue to stay hopeful as Gold price manages to yield daily closings above the 21-day Simple Moving Average (SMA), now at $2,505.  

The 14-day Relative Strength Index (RSI) has turned flat but still holds firm above the 50 level, backing the case for the bullish potential.

Gold buyers yearn for a sustained breakthrough the record high of $2,532, above which the $2,550 psychological level will come into play.

If Gold price faces rejection once again near the $2,530 supply zone, a correction would ensue, with a daily closing below the 21-day SMA at $2,503 needed to negate the bullish outlook in the near term.

A breach of the latter will challenge the previous week’s low of $2,472, followed by the symmetrical triangle resistance-turned-support at $2,462.   

The red-hot copper rally has cooled off in recent weeks, with prices pulling back from their May all-time high to close below $9,000/t. Just like in the oil markets, sentiment in copper markets has weakened, driven by weak U.S. manufacturing and labor market data, soft China data, and a sizable build in LME inventories. 

Last week, Goldman Sachs downgraded its copper price forecast, due to weakening demand from China. GS now sees copper prices averaging $10,100 per metric ton in 2025, a sharp reduction from its previous forecast of $15,000. Further, Australian mining giant BHP Group (NYSE:BHP) recently downgraded its forecast for China’s copper demand amid concerns about the country’s economic recovery. 

Thankfully for the bulls, the long-term copper outlook remains robust. A couple of months ago, Swiss multinational commodity trading company Trafigura predicted that EVs, Artificial Intelligence (AI), power infrastructure, and automation boom will drive at least 10 million metric tons of additional copper demand by 2035, According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, “A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers,” he said. 

Saad Rahim, Trafigura’s chief economist, has projected that AI alone has the potential to add one million tonnes per annum of copper demand by 2030.

Related: Rystad: Germany Set to Generate 80% of Its Electricity With Renewables by 2030

Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil and the best trade he has seen in his career. The analyst has pointed out that copper has long been touted as a big winner from the world’s drive towards electrification including electric vehicles and huge grid upgrades. At the same time, Currie notes that it takes years for new copper mining capacity to actually come onstream. However, copper prices have, unexpectedly, pulled back sharply several times over the past two years. Currie says this has created a mismatch between short-term prices and long-term supply, making copper his highest-conviction trade ever.

Meanwhile, a recent study, published by the International Energy Forum (IEF) says the EV revolution alone will drive enough copper demand to outstrip supply in the next couple of decades. According to IEF, current projections show that copper production will increase 82% to hit a massive 37.1 million tonnes by 2050; however, supply will need to increase by an extra 55% to power an all-EV global fleet– equating to the establishment of 194 new mines or six each year till 2050. With an estimated 6.66bn tonnes of global copper resources identified, copper scarcity is not the main issue here, rather than the fact that it takes ~23 years to turn a copper discovery into a functioning mine. The lengthy development time suggests the world is facing a near-impossible task to develop enough mines to meet demand in the available timeframe.

Source: Mining.com

The report, however, notes that if copper recycling remains constant at its 2018 level rather than increasing as assumed, 43 new mines will need to come online every year, with the copper demand gap clocking in at 8.1 million tonnes in 2035 and 9.6 million tonnes in 2040.

It is worth noting that the study used the same methods to arrive at this dire picture as the one used by American geologist M. King Hubbert to accurately predict 30 years of U.S. oil production. However, Hubbert’s model broke when technologies such as hydraulic fracturing, directional drilling and Enhanced Oil Recovery (EOR) made it possible to produce natural gas and crude oil from shale and expanded the hydrocarbon resource. This offers the world a narrow window to expedite the process of bringing new copper mines online.

Hybrids A Potential Solution

IEF has also offered another way to ditch efforts to replace fossil fuel-powered vehicles with all-electric vehicles and instead replace them with hybrids.

“There is remarkably little difference between the amount of copper needed to manufacture hybrid electric rather than ICE vehicles,” with the researchers pointing out that hybrid electric vehicles require 29 kg of copper compared to 24 kg for an ICE (internal combustible engine) vehicle.  “It would therefore be judicious to aim for a transition to the 100% manufacture of hybrid electric vehicles by 2035, rather than transitioning to the 100% manufacture of battery electric vehicles, which require 60 kg. The copper required for this transition is only slightly above baseline and does not require major grid improvements,” the report’s authors said. 

Fossil fuel investors will no doubt be pleased to know that hybrids remain incredibly popular in this age where pure EVs have become dominant, a full 25 years since Toyota Motor Corp. (NYSE:TM) launched the Prius. Nearly 3 million hybrid EVs were sold in 2022, good for nearly 30% of all EVs sold. Hybrids remain popular because they make considerable savings on gas and cut their carbon footprint without the attendant charging anxiety that comes with pure EVs. 

In a hybrid car, there is an ICE component and an electric motor, with battery-stored energy. However, a hybrid can’t be plugged in to charge. Instead, it is charged by the regenerative braking of the internal combustion engine. The extra power provided by the electric motor can potentially allow for a smaller engine, adding some environmental benefits. The battery can also power auxiliary loads and reduce engine idling when stopped, according to the Alternative Fuels Data Center.  

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com

Bottom Satisfied with Daily Close Above 2.30

Once a bottom is satisfied with an upside breakout, plus a daily close above the signal price level, the trend should be ready to progress. Higher, being the more likely direction given the confirmation of the double bottom breakout that defines a bullish trend reversal, from down to up. When measuring the pattern and projecting forward a potential target of 2.72 is suggested. The 61.8% Fibonacci retracement is just below that level at 2.67. Together, they point to a range of potential resistance from 2.67 to 2.72.

Higher Target Starts at 2.89

A higher possible target is identified up around the downtrend line. It converges with a price zone around the 78.6% retracement at 2.89 and a previous interim swing high at 2.92. Natural gas is progressing inside a large symmetrical triangle pattern. The advance off the second bottom recently confirms the pattern.

It also strengthens the possibility of an eventual test of resistance at the top of the triangle. Once the bottom of a swing within the pattern is reversed, there is the potential to test the other side of the pattern to see if resistance is retained or determine when a bullish breakout may be occurring.

Strength Seen Relative to 200-Day MA

One bullish feature of the trend is that today’s session is likely to end with the price of natural gas closing back above the 200-Day MA, after falling below the 200-Day line for the prior couple of days. This type of price behavior shows strength. Nevertheless, the market will be watching for another advance above 2.30, followed by a daily close above that level.

For a look at all of today’s economic events, check out our economic calendar.

XAU/USD Current price: $2,515.75

• The United States Consumer Price Index was roughly in line with expectations in August.
• Financial markets turned risk-averse as Fed expected to trim interest rates by 25 bps.
• XAU/USD met buyers around $2,500, aims to retest record highs in the $2,530 price zone.

Gold price peaked at $2,528.95, flirting with its record high mid-European session. XAU/USD, however, changed course and fell towards the $2,500 level after the release of United States (US) macroeconomic data. The August Consumer Price Index (CPI) rose by 2.5% YoY in August, easing from the 2.9% posted in July and below the 2.6% anticipated by market participants. The annual core reading matched expectations by printing at 3.2%, although the monthly core reading rose by 0.3%, slightly higher than the previous and expected 0.2%.

The news heavily weighed on rate cut expectations, with the US Federal Reserve (Fed) now expected to proceed gradually. Market players expect the central bank to trim the main rate benchmark by 25 basis points (bps) when it meets next week. As the dust settled, concerns receded. US indexes keep trading in the red, but trimmed half of their post-release losses, helping XAU/USD reconquer the $2,510 mark.  

The next first-tier event will take place on Thursday, as the European Central Bank (ECB) will announce its decision on monetary policy. Officials are widely anticipated to trim the three main interest rates by 25 bps each. If anything, a change in President Christine Lagarde’s usual wording can trigger action across financial markets.

XAU/USD short-term technical outlook  

From a technical point of view, the daily chart for the XAU/USD pair shows it remains on the bullish side despite the absence of upward momentum. The pair keeps trading above a bullish 20 Simple Moving Average, finding buyers around it. At the same time, the 100 and 200 SMAs maintain their bullish slopes far below the current level. Finally, technical indicators hold within positive levels, lacking evident directional strength yet maintaining the risk skewed to the upside.

In the near term, and according to the 4-hour chart, XAU/USD offers a neutral-to-bullish stance. The pair develops above converging 20 and 100 SMAs, at around $2,507.00, while technical indicators bounced from around their midlines, maintaining their upward slopes within positive levels.

Support levels: 2,507.60 2,489.60 2,475.70  

Resistance levels:  2,519.75 2,531.60 2,545.00 

• Silver attracts buyers for the third straight day and touches a fresh weekly top on Wednesday.
• The lack of any follow-through buying and mixed technical oscillators warrant caution for bulls.
• A sustained strength beyond the $29.00 mark is needed to support prospects for further gains.

Silver (XAG/USD) trades with a mild positive bias for the third straight day on Wednesday, albeit lacks bullish conviction and is currently placed around the $28.45 region, just below the weekly high touched during the Asian session. 

From a technical perspective, the white metal is holding above the 23.6% Fibonacci retracement level of the August-September slide and looking to build on the momentum beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart. Given that oscillators on the said chart have just started gaining positive traction, though are yet to confirm a bullish bias on the daily chart. Hence, the XAG/USD is more likely to confront stiff resistance near the $28.95-$29.00 confluence – comprising the 50% Fibo. level and the 100-period SMA on the 4-hour chart.

A sustained strength beyond, however, will be seen as a fresh trigger for bullish traders and pave the way for some meaningful appreciating move. The subsequent move up has the potential to lift the XAG/USD beyond the 61.8% Fibo. level resistance near the $29.25 region, towards the $29.65 area, or the 78.6% Fibo. level. The momentum could extend further towards reclaiming the $30.00 psychological mark, above which bulls might aim to challenge the August monthly swing high, around the $30.20 zone. 

On the flip side, the $28.25 region, or the 23.6% Fibo. level is likely to protect the immediate downside ahead of the $28.00 mark. A convincing break below could make the XAG/USD vulnerable to weaken further below the $27.70-$27.65 zone, towards the next relevant support near the $27.20 region en route to the $27.00 mark. Some follow-through selling might then expose the August monthly swing low, around the $26.40-$26.35 area, before the white metal eventually drops to the $26.00 round figure.

Silver 4-hour chart