The gold market has already seen plenty of action at the start of the week with price trading lower initially over the Asian session before rebounding as European traders hit their desks on Monday morning. The downside pressure is likely a reflection of the continued recovery in the US Dollar. The Dollar index has started the week in the green as traders continue to bid the greenback ahead of incoming president Biden’s inauguration this week. There was an interesting Wall Street Journal piece over the weekend claiming that Yellen, who is due to testify before the Senate Finance Committee this week, will affirm that the incoming administration will not be targeting a lower Dollar. This is important given the consistent calls over the course of the Trump administration for a weaker Dollar. Yellen is being considered for the role of Treasury Secretary and will reportedly tell officials that targeting the exchange rate will not be on the new administration’s priority list. Such a testimony could see the Dollar trading higher across the week which should limit the upside potential in gold.
Silver prices have tracked the early moves in gold with price trading lower initially before rebounding over the European morning. The rebound in the US Dollar has put an end to the prior rally in silver which unfolded across December. However, residual strength in equities is helping offset the negative impact of a stronger Dollar for now.
Gold prices are currently trading within the apex of a large contracting triangle pattern which has framed price action over the last year. Price has already seen a false break higher above the 1926.63 level before reversing lower. Price has now found support at the lower trend line of the pattern and the 1803.51 level. While this level holds there is still room for a continuation of the longer-term uptrend.
Silver prices have reversed from the move above the 27.3955 level. Price has since retested the broken bearish channel which has held as support for now, keeping price hovering around the 25.0756 level. To the downside should the current slide continue, the next level to watch is the 22.5950 level support, a break of which could open the way for a broader correction lower in silver. T the topside, the 27.3955 level remains the key level for bulls to break.
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