Gold prices have started the week in a relatively subdued manner with light flows noted over the European session so far on Monday. The main driver of upside movement in gold prices recently has been the weakness in the US Dollar. However, with the sell-off in the Dollar having abated over the last week, gold prices have lost a little bullish momentum. Furthermore, steady buying in equities markets over recent weeks has also attracted capital away from gold with traders happy to continue buying equities in line with rising central bank easing expectations.
The developing second wave of COVID 19 has seen traders steadily increasing their expectations that central banks will ease again ahead of the end of the year. The return of fresh lockdown restrictions in the UK and Europe has put further pressure on the ECB and the BOE while in the US, Fed chair Powell has recently called on the need for further support from both the central bank and the government. In its latest twice-yearly outlook released last week, the IMF warned that the COVID pandemic will cause long term damage to global economies even once the virus has subsided. While the bank had revised its growth forecasts for 2020 slightly higher, it is still forecasting the biggest global contraction since the Great Depression.
Silver prices have largely mapped the moves we have seen in gold with prices attempting to recover following the recent weakness. For silver, the upside moves in equities have been somewhat more supportive than they are for gold though the loss of bearish momentum in the US Dollar has offset the positive support from the equities rally. In the near term, the picture remains bullish for silver though any further pickup in the Dollar could change this view.
From a technical viewpoint. Following the recovery off the 1858.28 level, gold prices are now fighting to break out above the corrective bearish channel which has developed over the sell off from 2076.12 highs. While above 1858.28, the near-term outlook is bullish with 1979.25 the next target to note.
From a technical viewpoint. Silver prices continue to recover off the bear channel low though, for now the move has been capped by the 25.0756 resistance. If bulls can break back above here, attention will turn to the 27.3955 level next, with the bear channel top coming in just ahead of it.
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