Gold prices have started the week under pressure, extending the losses registered on Friday as the US Dollar recovery continues to gather momentum. The Dollar spiked higher on Friday in response to the latest set of US labour reports. While the headline nfop print was much lower than expected, coming in at -140k vs 60k expected, average hourly earnings spiked to a seven month high at 0.8%, far surpassing expectations for a 0.2% reading and marking a firm improvement from the prior month's 0.3% reading.
The Dollar appears to also be deriving support from better clarity around the US elections. With Biden now confirmed as having won the elections and with the democrats achieving a "blue sweep", the market is firmly focused on fiscal easing expectations. With expectations that the Democrats will look to deliver an attention grabbing package, this has taken some of the pressure off the Fed for now, sidelining expectations of any further monetary policy easing in the near term, keeping the gold outlook weighted to the downside over the same horizon.
Silver prices have tracked the moves in gold over recent days with price reversing from January highs to trade into negative territory on the year. The resurgence in the US Dollar is, for now, outweighing the better global manufacturing data which had been helping lift the outlook for silver prices. Despite the firmer buying in USD, equities remain well supported at highs which is helping offset some of the downside in silver. US CPI and retail sales data will be closely watched this week with any surprise strength likely to further drive the Dollar higher, exacerbating the sell off in metals.
Gold prices found selling interest on the brief move above the 1926.63 level with bears sending price back below the broken bearish trend line and the 1858.28 level. While price holds below here, the market is vulnerable to further downside. A break of the 1803.51 level could spell the start of a broader correction lower in gold.
Silver prices have reversed from a further test of the 27.3955 level which saw price breaking down to retest the broken bear channel. for now, the channel retest has held as support, sending price back above the 25.0756 level support. While price holds above here, there is still room for the market to continue higher. Below here, the next support to watch is down at the 22.5950 level.
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