Gold prices have started the week under heavy selling pressure as the surge higher in the US Dollar weighs on sentiment. Traders have been offering gold across the European morning. The US Dollar has been well bid on the back of a strong set of data on Friday. June retail sales came in well above expectations with the headline reading printing 0.6%, up from the prior month’s -1.7% and firmly beating the 0.4% forecast. The core reading was even higher at 1.3%, again marking a solid jump on the prior month’s -0.9% reading and the 0.4% forecast. The reading has once again fuelled expectations that the Fed will be forced to being tapering QE within the next few months. While the Fed itself remains adamant that the current lift in inflation and activity will be transitory, recent data suggests that the economic recovery is accelerating above the Fed’s forecasts. Over a much quieter data schedule this week, traders will be keeping an eye on any COVUD related headlines as well as any comments from Fed policymakers, with US PMI data on Friday the only key releases to note.
Silver prices have been heavily sold at the start of the week also, dropping at a faster rate than gold. Along with the rally in USD, silver prices are also being weighed on by the drop in equities prices. The uptick in USD, and expectations of Fed tapering over the coming months is forcing an unwinding of equities longs. If this current phase develops further, there is plenty of room for equities to unwind at a faster pace which would hit silver even harder. For now, the outlook remains skewed to the downside for the metals.
The recent rally in gold saw prices trading up to test the 1826.71 level resistance. While price pierced the level briefly, sellers have now taken price back below the level. MACD and RSI are still positive for now, though both are turning lower. To the downside, the key level to watch is the 1763.88 level.
Following weeks of consolidation in the 25.5384 – 26.5711 range, silver prices have since broken below the low of the range. With MCAD and RSI both bearish here, the focus is on a further push lower with the 25.1018 level support coming up next. A break there will pave the way for a much deeper move towards the 24.0073 level next.