USD Recovery Weighs on Metals

Orbex Weekly Metals Wrap

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Gold

The yellow metal has been lower this week in light of a late-week pickup in the US dollar.

The greenback moved higher in response to comments from Fed Chairman Powell who was peaking at the annual Jackson Hole symposium.

Powell confirmed that the Fed will now target a return to 2% inflation, despite acknowledging that it is counter-intuitive for the Fed to want higher inflation at this stage.

The US dollar has also been helped this week by a raft of positive data. Durable goods and preliminary GDP came in better than expected, lifting expectations that today’s PCE print, a closely watched inflation gauge for the Fed, will also surprise to the upside.

The continued rally in equities prices has also kept gold prices under pressure this week. The S&P500 has broken out to fresh all-time highs, boosted earlier in the week by news that US/China trade talks are back on track.

Following a three-month break during the height of the COVID-19 pandemic, officials from both nations held telephone meetings this week and re-affirmed their commitment to the talks.

Gold Prices Holding at Support

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Gold prices have had a disappointing run since breaking out to fresh all-time highs at the start of the month. Prices have since reversed and traded lower. However, for now, price remains above the bullish trend line.

Gold is currently sitting on the 1925.36 level support which has underpinned the recent correction from highs. While this level remains intact, focus remains on further upside.

Below here, the next support to watch is the 1826.71 level.

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Silver

The silver market has fared a little better this week.

Despite a broadly stagnant week of price action, and the downward pressure from both lower gold prices and a firmer US dollar, the continued strength in equities markets has helped silver prices remain firm.

Last week, a positive set of manufacturing data out of the UK and the US has helped keep demand expectations for silver skewed to the upside.

With industrial stocks climbing, the near term outlook remains favorable for silver prices.

Silver Still Capped by Resistance

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Silver prices continue to trade against the 27.4502 level resistance which has provided the upside hurdle to the correction off the 25.1018 level lows.

While prices hold above those lows, the focus remains on further upside in the near term with the 30.1117 highs the next target to note.

To the downside, any break of the level will bring the 20.4050 level into view as the next main support.

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