The gold market saw a dramatic recovery last week, with price rallying almost 11% on the week. Price has now recovered more than 13% off the 2020 lows. Last week marked a shift in investor sentiment as asset price began recovering in the wake of the latest central bank easing announced last week. The chief announcement came from the Federal Reserve in the US which announced that, following a series of rate cuts and the restarting of QE at $ 750 billion, it will now run QE as needed rather than to quota. This is an historic move for the Fed and appears to have helped stabilise markets for now.
The recovery in equities and commodities prices has helped underpin gold prices which are now rallying against a backdrop of subdued US rates and rate-path projections for 2020 as a result of the COVID-19 crisis.
The US employment reports on Friday will be closely watched by the market. Last week, US jobless claims soared above the 3 million mark casting serious shadows over the unemployment rate and NFP due on Friday. Very weak numbers in those readings could offer further support for gold.
The silver market has seen moves similar to those in gold over recent sessions with price rallying off the 11.73 lows to trade back above the 2015 lows (13.9553). The recover in equities, especially industrial indices, has helped lift sentiment in silver. However, the silver market is not out of the woods yet and remains vulnerable to further downside shocks due to the ongoing lockdowns which threaten to keep economic activity subdued in the near term. Chinese manufacturing data this week will be closely watched by metals traders. With a great deal of silver’s demand linked to the industrial sector in China, further weakness here could see silver turning lower again.
Gold (Bullish above 1608.10)
From a technical viewpoint. Gold prices rallied strongly off the yearly pivot (1445.98) and are now once again testing the yearly R1 (1627.70). With VWAP still positive and with price holding above the monthly pivot again (1608.10) bias remains bullish with the 1703.10 YTD highs the first objective for bulls.
Silver (Bullish above 15.0000)
From a technical viewpoint. Silver prices have now recovered above the 2015 lows of 13.9443. If price can hold above here and move back above the yearly S1 at 15.0000 there is the potential for a broader recovery. However, with VWAP still negative and with price below both the monthly and yearly pivot, further downside is still a risk.
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