Gold prices collapsed late last week with the market sinking to its lowest level since June of last year as rising US bond yield drive the Dollar higher again. It’s an interesting time for the market with price action in gold, equities and the Dollar reflecting the ongoing battle between those who feel the Fed will be forced to scale out of easing ahead of schedule and those who don’t. Better than expected recent US data has added weight to the view that inflation is due to spike quickly as the recovers steps up over Q2 with some players judging that the spike in inflation will need to be addressed by the Fed. For now, with gold selling off and the dollar gaining ground as US yields continue to break out, it seems this portion of the market is taking the lead.
While the Fed itself has said that it is not worried about inflation this year despite being bullish on the economy, the rise in yields is starting to garner more attention and if the dollar starts to build a base here, this could spell further trouble for gold in the near term.
Silver prices have largely echoed the moves seen in gold over last week with price breaking down as a resurgent Dollar put pressure on the metals complex. However, silver prices have retained far more support than gold and the sell-off was nowhere near as pronounced with price dropping back below the 27.3955 level but finding support into the February lows. While equities markets remain near recent highs, silver prices should stay underpinned to some extent. This week markets will be looking to the latest round of US manufacturing data which could offer silver some lift if strength is seen in the reading.
Gold prices are continuing to move lower within the broad bearish channel which has framed the correction from last year’s highs. Price has now broken down below the 1764.36 level and is fast approaching the next layer of support at the 1700 level. The break below 1764.36 is important and, while it holds as resistance, suggests the potential for a trend reversal here in the medium term.
The sell off in silver last week saw price breaking down below the 27.3955 level once again. However, the sell off has so far only run as deep as the February lows. While price holds above the 25.0756 level, the bias remains geared towards further upside
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