Copper: Earlier this week, the International Monetary Fund lowered its estimate of world GDP growth to 3.0% for 2019, the lowest since 2008. Copper prices have long been known as an indicator of world economic activity and are starting to become a voice of bullish dissent. December copper ended up 0.80 cent last week at $2.6360, its highest close in a month. Technically speaking, spot copper prices are coming off of an early September low of $2.4820 per pound, where prices were at their lowest level in over two years and found lots of support from the commercial side of the market. Both the weekly stochastic and the monthly stochastic have turned higher, catching the speculative side of the market heavily net short and vulnerable to an unexpected rally.
U.S. Dollar Index: In two previous blogs, we talked about the U.S. dollar index struggling with resistance at 97.87, a popular Fibonacci retracement level. Prices finally pushed above and reached a high of 99.67 two weeks ago, but it's been all downhill since. Last week, the index fell 1.19 points to 97.14, its lowest close in over two months, pressured by talk of a possible Brexit agreement and several bearish reports for the U.S. economy. The Brexit deal still has several layers of approval required and Europe's economies are struggling. Technically however, there is good reason to believe the 19-month uptrend in the U.S. dollar has ended. Both, the weekly and monthly stochastics have turned lower, and an October close below 97.86, if it happens, will confirm a monthly outside reversal -- a bearish technical signal for the U.S. dollar, which should be helpful to U.S. ag exports.
Gold: Back on May 28 when August gold was at $1,289.20, I talked about renewed support for gold prices, based on an outlook for lower interest rates and slower economic growth related to the U.S.-China tariff dispute. The commentary was especially timely as that was when the second leg of gold's uptrend began. December gold ended Friday at $1,494.10, a gain of $5.40 on the week. Fundamentally, gold is influenced by a combination of the two situations described above. We would expect gold prices to profit from a decline in the U.S. dollar index, but if copper's bullish turn suggests a more active world economy, that would have a somewhat bearish influence on gold prices. Technically, the uptrend in spot gold has paused after a peak of $1,566.20 in early September, and the weekly stochastic has turned down, but we can't yet say the uptrend is over. On a monthly chart, there is major resistance at $1,800.00.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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