Gold prices have seen renewed selling pressure over recent sessions following the breakout to fresh highs on the year last week which quickly reversed. The move above the 1747.15 level came with plenty of divergence on momentum studies and was short lived as both equities and the US dollar continue to see support, sapping the demand for gold here.
The fundamental backdrop regarding COVID-19 continues to gravitate towards optimism over the recovery, as lock-down measures continue to ease, and hopes of a vaccine. As various localised economies within the US, Asia and Europe continue to lift stay-at-home measures, business re-openings are being watched tentatively and, despite the risks of a second-wave of the virus, for now, investors are buoyed by the gradual pickup in activity and demand.
Hopes for a vaccine have added to this sense of optimism with Dr Fauci, the US government’s medical adviser, saying that the Moderna vaccine trials look “promising”. Following successful tests on a small patient group, Moderna is now carrying out broader testing and development with traders waiting for an update.
However, there are still residual factors which could see gold move higher. While COVID-19 cases continue to trend lower, a second spike in viral infections, raising the risk of the reintroduction of lock-down measures, would sharply curtail risk appetite. Furthermore, tensions between the US and china remain elevated here and threaten to spill over as China continues with its planned National Security law for Hong Kong, which could result in US sanctions against China.
Silver prices have broadly mapped the moves in gold with price selling off over recent sessions following a better bullish phase over the prior two weeks. Silver prices have seen firmer demand recently amidst the ongoing easing of lock-down measures on which the industrial demand outlook continues to improve. This view was bolstered last week by the release of better-than-expected manufacturing PMIs for the US, UK and Eurozone. If these data sets continue to recover we should see further demand for silver in the near term.However, the extent to which silver can rally is currently being offset by the strength in the Dollar which has started the week on a strong footing.
From a technical viewpoint. The rally in gold failed on the first breakout above the 1747.15 level as price tested the monthly R1. However, the correction lower has been shallow and price is still holding firmly above the 1703.10 level, with VWAP still positive. While above here, another push higher is seen towards the 1790.76 level
Silver (Bullish above 15.7376)
From a technical viewpoint. The rally in silver failed to complete the symmetry projection into 18.7870 and prices have since fallen back below the 17.2677 yearly pivot. However, with VWAP still positive, as price holds above the 15.7376 level, the near-term bias remains bullish towards the 18.7870 target initially.
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