Commodities outlook: Price action for oil, gold and copper

Obsessed by US-China trade talks, we assess implications and possible direction for major commodities. 

Unfortunately, I cannot talk about commodities without giving you an update on the trade negotiations between the US and China. 

Right now, we are in a stalemate situation with both leaders saying they do not mind pulling back on tariffs. The new issue is Hong Kong after the US passed another bill to block American exports of non-lethal crowd control products to the Hong Kong police force on Thursday morning. 

This is a clear sign that the US is not backing the Chinese stance on the situation in Hong Kong. And, although this move did not come from Trump himself, it will cause some conflict between the two superpowers. 

Elsewhere, the US has granted more exemptions for the telecommunications giant Huawei. Around 290 companies are said to have requested exemptions to Trump’s recent crackdown. Companies like Microsoft and Google had been banned from putting their apps on Huawei phones, but now the situation could be changed as trade talks move forward. It has been said that US official have flown to Beijing for face-to-face talks, but we are yet to receive updates.

Although these movements may not seem to have a direct effect on commodities, the fact that the countries and companies are resolving some issues is extremely important. Chips and processors in phones make up for a lot of metals sales around the world. If the sales figures improve and the market continues to grow, then demand for commodities will improve. 

Looking at copper on the weekly chart and, I am afraid to say, we are in no man's land. The area between $2.73 and $2.49 per pound is an inflexion point indicative of the current state of play in trade negotiations. 

Although the price broke the previous wave high of $2.7045 per pound, it failed to gather any meaningful upside momentum. The price is stuck at the mean value area which represents the price where most contracts have been traded on the Comex exchange. The price is closer to the wave high of $2.73 per pound, so I will be keeping an eye on this resistance zone over the coming weeks. 

Source: TradingView Past performance is not a guide to future performance

Gold has now formed a bull flag chart pattern and, although it is a descending pattern, it often produces an upside breakout. The key support zone is $1,369.4 per ounce, with $1,500 now a key psychological resistance zone on the upside because, if the gold price does make it that high, it will confirm the pattern breakout. 

The current risk environment is strong, with US indices making highs. Gold could be a casualty, but as soon we see any risk-off paradigm shifts, gold could enjoy a decent upside move. 

Source: TradingView Past performance is not a guide to future performance

The WTI futures contract has been pushing higher over the last three weeks. 

One thing that needs to be pointed out is the volume indicator at the bottom of the chart below, suggesting that the move higher has not been backed by large amounts of volume. 

The oil price is currently far from both previous wave highs and lows. The current price action is contained in a large consolidation pattern and the main support and resistance zones stand at $50.86 and $63.38 per barrel. Before those levels are hit, the broader pattern on the chart would be broken, so this is the current technical focus for WTI.

Source: TradingView Past performance is not a guide to future performance

Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.