Will Gold Break Out To New Highs?

Weekly Metals Wrap

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Gold

The yellow metal continued its recent bull run this week. Price extended to highs of 1738,87, as of writing, sitting just off the 1747.01 2020 highs.

The move north in gold this week was driven mainly by safe-haven inflows. This was amidst a weaker showing from equities which fell a little lower over the week.

The latest economic data released this week has raised further concerns over the economic damage of the lockdowns around the world. US, UK, and European manufacturing PMIs fell to their lowest levels on record over April.

For now, gold prices continue to see demand. This comes as central bank easing weighs on inflation and interest rate expectations across the rest of the year, particularly in the US.

Despite growing calls to ease lockdowns in a bid to stave off further economic damage, lockdowns continue to operate. They are likely to remain in place, for the most part, over the next few weeks. This means that gold is likely to continue to find safe haven support as we expect further data weakness.

Indeed, even once lockdowns are lifted, the pace of the recovery in individual economies remains highly uncertain. Further central bank easing seems a likely prospect, meaning that the outlook remains skewed to the upside for gold.

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Gold Testing 2020 Highs

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Gold is now heading back up towards the highs of last week’s bearish pin bar, which marks the 2020 high. While the high remains in place on the pin bar, a reversal lower cannot be ruled out.

However, if price clears above the 1750.67 level, focus will shift to a test of the next resistance levels at the 1787.85 level next.

Silver

Silver prices have diverged somewhat from gold prices this week. XAG prices fell lower across the course of the last five days’ trading.

Despite deriving some support from the upside moves in gold, silver has been weighed on by the downside move in equities, particularly industrial indexes, along with the ongoing rally in the US dollar which has also seen firm safe-haven buying, stemming upside in both silver and gold.

Silver Holds Above Key Support

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The move lower in silver this week has not yet breached the 14.3722 support. While above this level, focus remains on a continued push higher with a test of the 16.3502 level the next upside maker to watch.

This is a key structural level for silver and a break above there could signal the start of a broader recovery. To the downside, any reversal lower will put focus on a test of the 12.6219 level next.

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