The yellow metal has fallen back lower over the course of this week’s trading. Price is backing away from the 2020 highs which the metal was fast approaching ahead of this week’s sell-off.
The sell-off comes despite a weaker USD and lower equities prices.
The dollar was knocked lower by a set of soft US data readings this week as well as the April FOMC.
The meeting saw the Fed striking a dovish tone. It held off from making any further adjustments, but noted that the US economy had been hit hard by the virus. The Fed warned that further economic damage was likely to occur this quarter. However, the bank reassured investors that it stands willing to act further if necessary.
The US Q1 GDP reading came in at a dismal -4.8%. This was even below the -4% reading forecast. However, despite the rout in USD, it seems that gold prices have fallen lower amidst a broader sell-off in markets this week. This sell-off has also seen equities prices coming off.
However, for gold, the selling is likely just profit taking and for now, the bias remains bullish.
Gold Waiting To Break Higher?
For now, gold is merely correcting within the contracting triangle pattern which has formed near highs. This can be viewed as a bullish flag, suggesting an eventual topside break. This view will remain intact, favoring a break out to new 2020 highs, unless price moves back below the 1634.74 support level.
Silver prices have been knocked lower this week also. Despite the sell-off in USD which typically supports silver, the declines in gold and equities prices (particularly industrials) are weighing on silver.
With recent economic data across the globe painting a worrying picture of the global economy, industrial demand for silver in the near term looks likely to remain subdued.
This should provide a headwind to higher prices. However, if gold prices can resolve higher, this should offer silver some support.
Silver Prices Break Below Trend Line Support
Silver prices have broken down below the rising trend line from 2020 lows, with price reversing just shy of testing the 16.35 level. This remains the key upside marker. While price remains above the 14.3722 level, focus is on a further push higher. To the downside, should price break below that level the next support to watch is the 13.6219 level.