Risk Aversion Remains As Major Catalyst, Gold Reports Minor Losses

Gold is trading down but it remains in range, silver and copper are posting big losses. Risk aversion is the topic of the day.
Mauricio Carrillo
Risk Aversion Remains As Major Catalyst, Gold Reports Minor Losses
Risk Aversion Remains As Major Catalyst, Gold Reports Minor Losses

Gold is opening the week with losses as risk aversion is dominating the markets due to China and the United States trade conflict.

Silver is down to trade at 10-day lows around 14.65, while copper is losing 1.35% on the day to test 2.72 area, lowest since January 30.

Trump delivers more tweets

The trade war between the leading economies in the world worsened on Friday after the United States increased tariff on $200 billion worth of Chinese products. China said it is going to retaliate, but it didn’t give details.

On Monday, Trump warned China against retaliation at the same time that he blamed the superpower for broking the deal. “You had a great deal, almost completed, & you backed out!” the president said in a tweet.

“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump tweeted. “Too expensive to buy in China.”

Markets are watching developments in the trade war between the two countries, and recent events are fueling risk aversion across the markets. Major companies with tied relationships with China are suffering in Wall Street. The dow is ready to post significant losses on Monday.

Gold down but inside a small range

XAUUSD daily chart May 13

Gold is opening the week with its first negative trading day in the last three as investors are digesting new developments in the trade war between the United States and China.

The unit seems trapped between the 1,280 support and the 1,290 level, where a trendline that comes from February 20 is now. Currently, XAU/USD is trading 0.17% negative on the day as it is moving at 1,283.

Gold’s small gains in recent days despite the trade war is partially explained by Howie Lee, OCBC Bank economist, as he said experts are in some kind of denial.

“Markets are still living in some form of half-glass full optimism, but that is likely to erode with time as the reality of a full-blown trade war sinks in.”

Lee states that he expects “demand for gold to gain traction in the coming weeks.”

To the upside, gold should have a close above the 1,290 level to open the door to bulls. Above there, 1,310 will be the next resistance.

To the downside, check the 1,280 as immediate support, then 2019 minimums around 1,266.

Silver accelerates losses

XAGUSD Silver daily chart May 13

Silver is trading negative on Monday with the pair accelerating its decline and heading to the 14.60 area, 2019 minimums.

XAG/USD is trading under pressure amid risk aversion but also in line with its positive correlation with gold.

Currently, XAG/USD is posting 0.80% daily losses as the unit is trading at 14.65. The pair is now focused on a test at the 14.55-60 area, where the lows since December 20 are.

If the pair breaks below the 14.55 area, next supports are identified at 14.50 and 14.00.

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