FTSE 100, Gold Forecast: Two trades to watch

FTSE rebounds as miners surge on record copper prices

The FTSE 100 is rising around 1% on Wednesday, outperforming European peers after yesterday’s sell-off, with gains led by banks and mining stocks as copper hits record highs.

Banking shares are recovering after recent pressure linked to speculation over a potential leadership challenge to Keir Starmer. Investors had become concerned that a weaker Starmer government — or a shift towards a more left-leaning leadership — could result in looser fiscal policy and increased borrowing, unsettling the UK gilt market earlier in the week.

For now, Starmer appears to be holding onto power, easing some of those concerns and helping stabilise UK government debt markets. That has provided support for the banking sector, with HSBC up around 1%, while Lloyds Banking Group, Barclays and NatWest Group are advancing between 1% and 2%.

However, the larger driver for the FTSE is strength in mining stocks as copper rallies to a fresh record high, extending gains into an eighth consecutive session. Aluminium, nickel and iron ore prices are also moving higher.

Copper has been supported by a recovery in Chinese demand and mounting concerns over global supply disruption. The metal, often viewed as a bellwether for the global economy, has gained momentum in recent weeks amid improving activity indicators in China.

At the same time, supply concerns linked to the Middle East conflict are intensifying. Around one-fifth of global mined copper production relies on sulphuric acid, and disruption to Middle Eastern sulphur supplies is threatening production chains. Concerns over fuel availability in Peru, one of the world’s key copper-producing regions, are adding further pressure.

The combination of tightening supply, resilient Chinese demand, the energy transition and growing demand from data centre infrastructure is creating a powerful tailwind for the sector despite broader concerns over the economic fallout from the US-Iran conflict.

As a result, Rio Tinto is rising around 4%, Anglo American is up 4.3%, while Glencore and Antofagasta are both gaining roughly 3%.

FTSE 100 – Technical analysis

The FTSE 100 rebounded from support near the 200-day SMA around 9,665 before running into resistance at 10,420. The index subsequently fell back below the 50-day SMA and tested rising trendline support near 10,175.

The rebound from trendline support is now driving a retest of the 50-day SMA near 10,340.

A move above the 50-day SMA and the May high at 10,500 would create a higher high and strengthen the bullish outlook, opening the door towards 10,700.

Failure to reclaim the 50-day SMA could leave the index vulnerable to another test of 10,175 support. A break below there would expose 10,000 and potentially the 200-day SMA near 9,890.

Gold slips as stronger inflation data boosts Fed expectations

Gold prices are struggling to recover after yesterday’s pullback following stronger-than-expected US inflation data, with markets now turning attention towards US PPI figures and the Trump–Xi summit in Beijing.

Both headline and core US CPI came in above expectations, prompting markets to increase bets that the Federal Reserve may need to maintain a more hawkish stance. Traders are now pricing in more than a 40% probability of a Fed rate hike by year-end.

The inflation data pushed Treasury yields and the US dollar higher, weighing on non-yielding assets such as gold. The 30-year Treasury yield briefly touched 5%, while the two-year yield remained close to the key 4% threshold.

The US dollar is also benefiting from renewed safe-haven demand amid rising tensions between Washington and Tehran, climbing to its highest level in a week and further pressuring bullion.

Attention now shifts to US PPI data, which is expected to show wholesale inflation accelerated to 4.9% year-on-year in April from 4% previously. A stronger reading could reinforce concerns that consumer inflation will remain elevated in coming months, supporting a higher-for-longer Fed narrative.

Markets will also watch closely for developments from the meeting between Trump and Xi Jinping. Any signs of improving relations between the two largest economies could reduce safe-haven demand for gold.

Gold forecast – Technical analysis

Gold’s rebound from the 200-day SMA near 4,100 stalled at resistance around 4,890 near the 50-day SMA. The metal also remains below falling trendline resistance, reinforcing the near-term bearish bias.

Failure to break above the 50-day SMA and trendline resistance could see gold retest support at 4,650, the weekly low. A break below there would expose 4,500, followed by 4,370 — the 50% Fibonacci retracement of the rally from 3,120 to 5,598.

On the upside, a move above the 50-day SMA near 4,750 would bring 4,890, the April high, back into focus. A break above that level would create a higher high and shift the broader structure more positively, opening the door towards 5,000.