I personally don’t trade precious metals like gold or silver, or industrial metals like copper. As a currency trader I watch them very carefully since currencies like the AUD, NZD, NOK and CAD tend to be very sensitive to them.
As you know, gold, silver and copper have been under tremendous pressure as of late. The Strong USD as of late has been an added thorn to their side as well in the last year. Frankly, I am not too sure how much lower they can go, or when they will bottom. But the charts you see here, could argue we are at levels that may provoke a bounce.
Take a look:
As you can see with gold, we are trading very close to a 50% retracement near the 1070 level. We have probing above and below this level the last couple weeks.
Silver shows we are sitting on a multiyear trend line, which suggests that the $14 level is a very big support.
Copper is also trading at a multiyear trend line. However, one could argue that we connect the tip of the candle back in 2008 and you could take support closer to 1.95 which is also the 78% retracement. Take a quick look at the MONTHLY RSI oversold conditions!
Regardless of how you feel about the commodity markets and precious metals in particular, one could argue that they are getting close to a bounce. It may not be the ultimate low, but I think value players will be looking soon at these commodities.
The next question is how the AUD, NZD, NOK and CAD react to some of these commodities if they do bounce soon. I suspect they could also see a bounce higher as well. If you take a look at the AUD below (which has a strong correlation to copper and gold) has not been following the metals market lower the last couple months. We could be setting the stage for a bounce here too.
Chief Currency Strategist, Wizetrade
Disclaimer: I have been long the AUD/USD for the last 2 days, and I am looking to add to current exposure.