Gold

Gold prices fell to their lowest level since July last week amidst an uptick in US inflation expectations. An unexpectedly strong January US Retail Sales reading (5.3% vs 1.2% expected) added further conviction to the growing view that US inflation is at the foot of an imminent and acute increase. With all eyes firmly on the US recovery, many market players have revised higher their US economic forecasts amidst the progress being made with vaccinations and the expectation that Biden’s $1.9 trillion fiscal stimulus package will be passed by March.

The president told reporters last week that he is now targeting making vaccinations available to all US citizens by July, creating further optimism in the market. Despite the optimism, equities markets have paused in their ascent, allowing gold to recover some losses into the end of last week. The ongoing power outages in Texas as a result of the snow-storm there have seen stock-markets pausing for now though, in light of the broader backdrop of vaccination progress and fiscal easing expectations, the rally is likely to resume in the near term keeping gold pressure to the downside.

Silver

Silver prices have not seen the same downside movement that we’ve seen in gold of late. With the broader Dollar downtrend keeping silver prices underpinned and with equities remaining near highs, silver is still finding plenty of buying interest on dips, keeping the bias geared towards further upside in the near term. Last week, the latest round of manufacturing PMIs added further support for silver prices with Eurozone and UK factory sector readings seen continuing again last month, keeping demand expectations underpinned. In the US, however, the factory sector was seen falling a little on the prior month. Looking ahead this week, traders will be focusing on Fed chair Powell’s testimony in the Senate which is likely to impact the US Dollar.

Technical Views

GOLD

Gold prices continued to break down last week. Following the bounce off the 1803.51 level, price found selling interest into the 1858.28 level and turned lower. Price has since found support at the 1764.98 level but tone remains heavy and the market is vulnerable to a break lower here. Should price slip below here, the next support to note is the 1669.42 mark.


SILVER

Silver prices continue to hug the 27.3955 level. Price has remained highly congested over recent weeks though, for now, the bias remains in favour of a breakout higher targeting the 29.8611 level once again. To the downside, 27.0756 remains the key support to watch.

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