Gold Hits 9 Year Highs as USD Sinks

Orbex Weekly Metals Wrap

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Gold

The yellow metal has seen a strong rally this week with price breaking out to fresh 2020 highs.

The move comes despite equities remaining near recent highs and is primarily driven by the sell-off in the US dollar.

The greenback has come under renewed selling pressure this week amidst growing fears of a second wave of COVID-19. Currently, over 40 states are reporting new highs in infection numbers.

The US has come under widespread criticism for its handling of the virus. Some states are needing to reintroduce lockdown measures to combat a fresh outbreak of the virus.

US unemployment claims on Thursday came in lower than expected. This suggests that the post-lockdown recovery in the economy is continuing this month.

The June jobs report highlighted record growth in employment with nearly 5 million jobs added last month. However, the prospect of further lockdowns is weighing on USD, keeping gold prices supported as traders move back into the safe-haven on a larger scale.

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Gold Hits Highest levels Since 2011

gold

Gold price broke out above the 1795.66 level this week, trading back up to their highest level since 2011. While price holds above here, the next level to watch is the 2011 closing high of 1823.25.

As price continues to move higher within the rising wedge pattern, traders should keep an eye on the RSI indicator as any bearish divergence could highlight a potential reversal lower.

Silver

Silver prices have been well supported this week amidst a perfect combination of higher equities prices, higher gold prices, and a lower US dollar.

With USD likely to remain under pressure in the near term, the outlook remains bullish for silver. Recent industrial data sets have helped support silver as manufacturing continues to recover, reinforcing the view of a demand recovery for silver.

However, this view could change if the virus in the US causes further lockdowns.

Tensions between the US and China could also pose downside risks for silver if hostilities lead to a breakdown in trade negotiations. Prices were heavily weighed down by the two-year US/China trade war which decimated demand levels in silver.

Silver Approaching 2019 Highs

Silver

Silver prices have broken out above the bearish trend line and the 18.83 level this week. While price remains above the broken trend line, focus remains on a further grind higher.

The 2019 highs of 19.62 are the next upside area to watch. Should price break back below the trend line, the 17.42 level is the main support to note ahead of deeper support at the 16.53 level.

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