Will metal prices go up or down in 2020/2021? How will the metal industry be affected by Brexit?

The metal industry has suffered greatly by the uncertainty caused due to delays during the Brexit negotiations. UK metal traders reported a major decline in the metal prices of up to 50%. This was a result of reduced consumer demand. However, there is potential for the value of metals to improve during 2021 especially due to the increased certainty following the Brexit deal. Many experts support that there will always be a demand for metals in the UK.

How did Brexit influence the Gold and Silver Market?

As already stated, many analysts argued that gold and silver prices will soar because of Brexit. This was mainly due to the fact that investors would have taken their money from the stock exchange in their effort to find a safe-haven asset. For instance, when the EUR/USD declined, many investors turned to real money such as gold and silver.

As James Butterfill, head of research and investment strategy at ETF Securities, stated before Brexit: “Brexit would be very beneficial for shorting sterling and we will probably see a big pick up in gold. In that scenario we think gold could hit $1,400 [an ounce]”.

There are three potential reasons for this:

1. Brexit
2. Republican Presidential nominee, Donald Trump
3. Federal Reserve’s interest-rate policy

The metal market usually responds positively when there are expectations that the FED would follow through on their rate hike promises, as history shows repeated patterns of gold and silver price climbing along with interest rates. Even a small rise in interest rates will negatively impact metals’ trading.

Advantages of the Metal Market

All this uncertainty can be utilised by traders to their advantage by investing in gold and silver every time that the FED Chairwoman Janet Yellen talks about raising interest rates. People should not fall for this trick though and panic about their positions as they can go ahead and buy their metals or shares at a better price.
Gold price is expected to rise to $1,500 while silver to $20 irrespective of political uncertainties such as Brexit or the FED raising rates. However, failure to do the latter will result in gold rising above $1,600 and silver above $27 by the end of the year.

It is also expected that over the next months, the gains in gold and silver will be very high, while quality mining stocks will be where the real money is made. The past has shown that mining stocks have provided leverage 4 times more than the underlying move of the metals. Some mining stocks are up 200% or more. For instance, silver stock pick is up 270%. After such a big move, many investors are hesitant to buy although mining stocks are bouncing off drastically.

Overall, it seems that whether post-Brexit realities will have a long-term impact on UK metals remains to be seen. In order to avoid any risks and fill in the gaps, traders may already be focusing their efforts on alternative, emerging markets outside of the EU.

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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Solid financial data from the US in the past days, seems to have worked an unexpected trick on various markets and may have left traders puzzled for the time being. US ISM Manufacturing came out much higher than expected while on the past Friday the US employment report rocked the scene with superb figures, as the unemployment rate dropped further to 6.0%. While all this was taking place however, the greenback was slumping. The fall was also extended on Monday with the release of the record ISM services report. Most traders may have been expecting the USD to strengthen even further yet the opposite took place. On the other hand, Gold’s price moved higher in the past three consecutive days and reached higher on Tuesday’s European morning. The bullish reaction is evident yet traders have a long way to go before reversing Gold’s trend so far in 2021.

The bullish reaction from Gold traders however, could be aligned with the overall view on the US economy by the Federal Reserve. The financial data received in the past days could possibly be better than expected and could be signaling an even faster recovery than analysts and economists predicted. Can the Fed now be forced to change its loose monetary policy and switch to a more appropriate one, after the recent upbeat releases? This could be the message that Gold traders may have received in the past days prompting them to hit the offer button. Traders are advised to be mindful of the FED minutes to be released on the 7th of April as the event could prove useful for further clarification.

On the other hand yesterday the Wall Street Journal claimed the Senate’s nonpartisan parliamentarian was in favor of a Democratic effort to pass additional legislation, opening the door for Democrats to approve more fiscal actions. The same report states that plans of a $2.3 trillion infrastructure plan is on the table and could be announced shortly. In our opinion, announcements of any new fiscal measures can be considered a highly tradable event for Gold, possibly favoring the bears similar to what happened when the $1.9 trillion fiscal package announcement was delivered.

Finally, in the next day’s important financial releases from the US could move gold’s price upon release thus caution is advised if traders are planning to place orders. On the 8th of April Thursday we get the weekly US initial jobless claims figure. Moving into the next week on Tuesday the 13th of April we get the US CPI data for March, which tends to be a decisive metric for the economy’s recovery and we expect the market to keep an eye out specifically for this event.

TECHNISCHE ANALYSE

XAU/USD 4H Chart

After the recent selloff that Gold’s price displayed, the precious metal fell to test our (S3) 1680 support level. This level was tested once more in 2021 back on the 8th of March making the support line a determining factor for the bears or bulls accordingly. However, higher we could also expect a brief stop of the price action at the (S2) 1700 round number level. Yet at the moment the yellow metal is trading above the (S1) 1720 support line which was tested extensively in March proving to be rigid, before breaking recently. On the other hand, our first resistance is found at the (R1) 1755 level which was last tested on the 18th of March. Higher we have noted the (R2) 1775 line and even higher the (R3) 1795 barrier. At the moment, Gold’s price action is between the (R1) 1755 resistance level and the (S3) 1680 support level forming a sideways trend line. These levels even though tested have not been breached in March or April. In a more long term view however, the precious metal remains in a downward trend.

If you have any general queries or comments relating to this article please send an email directly to our Research team at research_team@ironfx.com

Disclaimer:

This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

The post Gold regains attention after recent jump appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.

The new package includes Stimulus checks, benefits for the unemployed people, loans specifically designed for small businesses, grants for theaters and other live venues, rental assistance and others. In our opinion these actions will provide a necessary support for families and businesses but this support can be temporary and not a game changer. Most probably further actions will be required if the economic circumstances do not improve in the second half of the year. Despite the slow start of the year some investors are willing to take actions and invest during the current uncertainty. The uncertainty could prove a great opportunity in our opinion, as due to the fear that controls most of the global economy some opportunities are overlooked at the moment. Of course, it takes courage for investors to act upon certain ideas, yet the ones that do so have more chances of being compensated.

Some of the current economic indicators in the US are in focus for the current week and will be released in the following days may be confirming the slow start we are expecting in 2021’s first months. In the following days the ISM Manufacturing PMI monthly figure for December will be released. Even though the economic indicator has been improving since April, overall and has dropped only in September and November, the December reading is forecasted to drop also. Our opinion is that the expectations for the reading to drop are based on tighter lockdowns measures in the US in December. Similarly the ISM Services PMI has seen an improvement in all months except August, October and November for 2020. December is also forecasted to be a negative month for the indicator possibly due to the same reasons. Furthermore, on Friday we get the US employment report. US Jobs created have been on a decline since July making it evident that businesses are finding hard to add new employees to their operations. We could go even further and say that as long as covid cases are on the rise in the US and the global economy, consumer and general economic sentiments could remain in a decline. We are connecting the performance of the pre mentioned sectors in the previous months, to the economic activity of the next months due to the fact that we may be seeing a continuation of these circumstances at least until spring.

Despite the unclear economic circumstances expected in the first part of 2021, we have come across information that confirms consumers are currently approaching the negative circumstances, in a defensive manner. According to the Wall Street Journal personal saving rate in the US was 12.9% in November. Even though the figure may seem small to many market participants it is much higher compared to the 7.5% rate a year earlier. It could be said that the savings per consumer could be a promising sign for increased spending in the future and after lockdown measures are eased and more people are vaccinated. However, vaccination is still being rolled out and the confidence in spending is expected to kick in after the first half of 2021. This timeframe of 6 months could contribute further to the savings not only to US citizens but also to many people around the globe that could intensify further investing, spending or business booming, once the positivity returns. A happening that is most probably to have increased US consumer savings is the low interest rates that the Federal Reserve was quick to bring forward. Perhaps, low interest rates are expected to remain in the picture for the next couple of years which encourage consumers to spend more on other goods or save more money as lower rates reduce their monthly mortgage payment. Evenly, a low interest rate environment supports borrowing or purchases which is also an advantage for businesses and consumers.

Finally, circumstances in the past months which are currently even worse, have hurt retailers and their sales. Special events like Black Friday or Cyber Monday did not see the expected interest by consumers in November. The events were said to be used as indicators for further performance of the retail sector which is taken very serious towards the overall activity of an economy.

Retail sales are a significant economic reading due to the fact that consumer spending contributes heavily to the growth of the economy. In order to produce the goods that the retail sector includes, a huge number of people and companies are working to produce, distribute, and sell the goods consumed on a daily basis, further magnifying the sector’s importance. Looking forward and after the research performed for this report we cannot see the circumstances being very bright at the moment for the US economy. Yet, as we have mentioned before intensive vaccination, low interest rates and the possibility of further and greater fiscal spending once Biden takes office, underpins a swifter recovery of the US economy. Thus analysts expect the GDP growth rate to outperform expectations in 2021 and possibly recovering more ground than the contraction suffered in 2020.

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