After seeing heavy selling over recent weeks, gold prices saw a resurgent demand this week. Price rallied off the 1764 lows to trade back up to around 1806 as of writing. The rise in gold prices this week is more a reflection of a weaker USD than any safe-haven driven action.
Equities and risk assets as a whole have been rallying this week, driven higher by positive trader sentiment in response to vaccine news. With Pfizer given UK regulatory approval for its drug, and with several other firms submitted drugs for regulatory approval, risk sentiment has been buoyed as traders finally begin to sense and end in sight to the pandemic.
However, this week, the sharp selling in the US Dollar has acted as a counterweight to the upside I risk assets, and gold price has been able to build a recovery off that.
In terms of the outlook for gold, given the broader themes of economic optimism linked to the COVID vaccines, the risks appear to be skewed to the downside. The current rally is likely to prove a short-lived correction.
Gold Retesting Broken Pattern
The rally in gold prices this week has seen the market breaking back above the 1826.71 level. Price is now retesting the underside of the broken fallen wedge pattern. While below here, it remains vulnerable to a deeper push towards the 1700 level next.
To the topside, a continued recovery here will put the focus on a test of the 1919.92 level next. The fallen wedge top comes in around the same level also.
Silver prices have also rallied over the week. Price accelerated up off the latest test of the 22.3205 level support to trade highs of 23.9852 last.
Silver prices have, of course, been lifted by the rally in gold and the simultaneous weakness in the US Dollar.
Additionally, silver has also received support from the ongoing rally in equities. These have been driven by more encouraging vaccine news. Furthermore, better global manufacturing data has lifted the demand outlook for silver.
Silver Rallies Off Support
Silver prices have rallied off the 22.3205 level once again this week as the level continues to find solid demand. While above here, a further correction within the 22.3205 – 25.1018 range is likely.
Price is also approaching a retest of the bearish trend line from year-to-date highs which is also likely to find some resistance.