The yellow metal has traded higher again this week, breaking out to fresh 2020 highs. With market conditions having stabilized over the last few weeks, gold has reverted back to more typical trading dynamics; rising when equities fall due to safe-haven demand.
Indeed, the rally in gold this week has come amidst the return of safe-haven demand for the dollar also, which has dampened gold upside a little.
With economic lockdowns still in place around the world, and many countries having extended these orders for the next few weeks (France, UK) there is still a great deal of economic uncertainty.
However, for the most part, it seems that traders have been reassured by the actions of central banks which have helped asset markets recover over recent weeks.
There are still big questions ahead though, such as when the lockdowns will end, and how fast will the pace of the recovery be? These will be key to determining the price action we see across the markets, including gold.
For now, the huge easing in place in the US, as well as the sharp drop in inflation, means that gold prices have room to improve further over the coming weeks. This will be especially true if equities prices remain subdued here.
Gold Stalls At Major Resistance Level
The rally in gold this week saw price trading up to test the 1750.67 level which has held as resistance so far. While price holds above the 1700 level, however, focus remains on further upside. If price pulls back beneath this level, however, focus will turn to the 1634.74 level support ahead of the broken bull channel top beneath.
Silver prices have been higher this week also, in line with the moves seen in gold. However, the pull-back in silver from the week’s highs has been deeper than in gold. The mover lower in equities this week, along with a firmer US dollar is weighing on silver here.
However, with gold likely to continue advancing in the coming weeks, the outlook remains broadly bullish for silver. Manufacturing data from the UK and Europe will be closely watched next week with soft readings posing some downside risk for silver due to its frequent industrial usage.
Silver Threatening Reversal Lower?
The recovery rally in silver has stalled for now, just shy of testing the major 16.3502 level. Price has also broken beneath the rising wedge formation, suggesting the risk of a deeper move lower. However, while 14.3722 holds as support, focus remains on a continued push higher. Below here, however, the 13.6219 level is the next support to watch.