Gold prices are continuing to surge higher this week as the US Dollar decline deepens. The greenback has come under increasingly heavy selling pressure, despite a string of better US data. Last week, inflation, retail sales and weekly jobless claims all came in better than expected with retail sales in particular, displaying a strong beat on expectations.
However, it appears the data has done little to shift sentiment in the Dollar given the Fed’s consistency recently in maintaining that tightening will not take place this year.
With the Dollar now once again fixed on a downward trajectory, gold prices have seen a more than 6% rally over recent weeks, taking price back up to the top of the bear channel framing the correction from last year’s highs.
With equities continuing to surge higher also, the move appears little to do with any safe haven inflow and is instead seemingly driven solely by the weakness in USD. With a much quieter data schedule for the US this week, the only noteworthy release will be PMI data due on Friday. With this in mind, the current dynamic looks likely to continue, leading gold higher over the week.
Silver prices have also been on a steady upward trajectory over recent weeks, with buying continuing across the European session so far on Monday. The metal is largely tracking the upside move in gold and has been further helped by the continued strength in equities, particularly in industrials.
This week, traders will be watching the latest round of manufacturing PMIs from the US, Europe and UK. Further strength in the factory sector should help support a continued rally in silver as the demand outlook continues to improve amidst increasing vaccination optimism and global re-opening expectations.
The rally in gold prices this week is seeing price attempting to break out above the bear channel top, having broken above the 1763.88 level resistance. While above here, the focus is on a continued push higher towards the 1826.71 level next. To the downside, should price slip back below the 1763.88 level, the next support zone is down at 1700.
Silver has now broken out above the falling wedge pattern which framed the correction from 2021 highs. With price now moving above the high of the structure, the next level to watch is the 27.4502 region. To the downside, 25.1018 is the next support to watch.
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