Metals Regaining Topside Momentum?

Orbex Weekly Metals Wrap

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Gold

The yellow metal started the week on a soft footing. Prices retreated towards the 1679.87 support level. This saw demand kick in fuelling a strong reversal higher to take gold positive on the week once again.

The reversal higher on Thursday was mainly fuelled by the weakness in the US dollar. The currency was sold as weekly jobless claims came in at 3.2 million. This was higher than the 3 million forecast.

Gold prices have risen this week, despite the rise in equities prices. This suggests an underlying level of safe-haven demand. Traders are now beginning to make calls on the likely path of the post-lockdown economy in the US. With economic data continuing to print lower levels across many key readings, the prospect of further easing from the Fed is keeping gold prices supported at current levels.

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There has also been an uptick in concern this week over the health of US/China relations in light of the US accusing China of manufacturing COVID-19 in a lab. The US has further threatened to apply financial penalties of up to $1 trillion dollars as a result of the damage caused to the US economy.

With these tensions darkening the backdrop further, gold prices are likely to stay supported over the coming month. Furthermore, as lock-downs begin easing, the risk of a second outbreak of the diseases remains a very real threat which could further damage the US economy.

Bull Flag Pointing To Further Upside

The correction lower from the 1480.80 highs has been framed by a bearish channel. The structure can be viewed as a bull flag. This suggests an eventual break higher and continuation of the upside move from mid-March. The channel top will be the first test, followed by the 2020 highs themselves. To the downside, the 1679.87 level remains the key support level.

Silver

The silver market has broadly tracked the moves seen in gold this week and was boosted on Thursday by the rally in gold prices and the drop in the US Dollar.

Furthermore, with equities retaining a bid this week, silver prices have been deriving support from higher prices in industrials equities. The US Labor reports tomorrow hold the potential to boost metals further as the dollar is sold in response to further weakness. The headline NFP reading is forecast to come in at new record lows of -2.14 million jobs.

Silver Challenging Resistance

The rally in silver has seen price trading up to test the upper line of the current bull flag pattern as the recovery off the 14.53 level continues. If price breaks above the channel, the 15.85 level will be the next resistance level to watch ahead of the bigger 16.53 level above that.

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