Equities Advance Stalls Metals Recovery

Orbex Weekly Metals Wrap

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Gold

The yellow metal has been a little softer this week with price weighed upon by the firm rally in equities prices.

Despite concerns over the rising second wave of the COVID-19 virus, equities prices have been well supported by expectations of further central bank easing.

The situation continues to intensify around the globe, with most countries reporting increasing infection rates and deaths. Meanwhile, central banks have been clear in reassuring markets that they stand ready to ease further as necessary.

With this in mind, equities prices have been able to find firm demand again over recent sessions.

The expectations that central banks are on the brink of another round of easing is also helping underpin gold. However, for now, traders appear more drawn to higher-yielding assets to take advantage of the rally we are seeing in risk assets.

USD weakness also continues to provide a buffer for gold.

However, news that Trump has canceled any plans to launch a further stimulus package ahead of the presidential elections next month is creating some downward pressure on gold, offsetting the more supportive themes in play.

Looking ahead, there are latent downside risks to the global economy. These are mainly the second wave of the virus, as well as the US elections.

This uncertainty is likely to keep gold prices supported. The extent to which gold can rally, however, will depend greatly on the movements in the dollar as well as in the equities markets.

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Gold Capped At Resistance

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Following the breakdown through the rising trend line from year to date lows, gold prices found support ahead of a test of the 1826.71 level. However, the rebound has so far run into resistance at the 1919.92 level.

For now, the sell-off remains corrective and the medium-term view is still for a continued bullish trend

Silver

Movement in the silver market this week has largely echoed the price action we’ve seen in gold. Silver prices were trading lower across the week.

Silver prices have been attempting to drift higher across recent weeks, supported by the strength in equities markets and the weakness in USD.

However, concerns over the global demand environment as a result of rising lockdown risks are creating downward pressure on silver prices. In the near term, price action is likely to remain labored.

However, greater volatility in USD as we head towards the election is likely to unlock some better directional moves.

Silver Trend Line Still Holding

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Silver prices recently found support at a test of the rising trend line from year to date lows which has been underpinning silver this year.

However, for now, price action is being stalled at a test of the 25.1018 level resistance.

Bulls will need to see a break of this level to restore upside momentum. If price should break back below the rising trend line, the next support to watch is down at the 20.4050 level.

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