Monday, November 23

Precious Metals Monday – 07-09-2020

Gold

The gold market was seen moving lower across last week as the rally in the US Dollar exerted firm downward pressure. The greenback had been driven higher over the week in reaction to a broad range of positive economic releases. With both the ISM manufacturing and non-manufacturing readings showing strength on the prior month sentiment moved swiftly in favour of the Dollar into the middle of the week. This positive sentiment was then extended into the back end of the week, firstly by a weaker-than-expected set of weekly jobless claims and finally by a positive set of US labour reports on Friday.

The US labour readings on Friday were under close scrutiny following the fall back in jobs growth seen over the prior month. While the headline reading itself slightly undershot expectations at 1.371 million versus 1.375 million expected, the reading was broadly in line with estimates and confirmed that jobs continued to grow at a solid pace over August, furthering the post-lockdown recovery underway there. While the headline figure might have been a slight disappointment for some, the other readings included in Friday’s release made for very encouraging reading indeed. The average hourly wages figure was seen rising at 0.4% on the month, well above the 0% expected while the unemployment rate was seen falling back to 8.4% from the prior month’s 10.2% and well surpassing expectations for a fall down to the 9.8% level. On the back of these data points, the near term picture remains bullish for the dollar which should continue to provide a drag on gold at current levels.

Silver

Silver prices were lover the week also, tracking the moves in gold. While silver prices had been supported to some extent by firm buying across equities markets last week, the recovery in the US Dollar proved to be the dominant factor in determining the price action across the metals markets. Silver price continue to hover just below recent highs and with equities continuing to trade higher, the near-term outlook remains neutral as equities gains help offset the downward impact of a stronger US Dollar.

Technical Views

GOLD (Bullish above 1919.81)

From a technical viewpoint. Gold prices continue to test support at the 1919.81 level, where we also have the rising trend line from earlier 2020 lows. While this region holds, the near term outlook remains bullish with attention on a run back up to the all time highs at 2072.91. however, should price break down through here this could signal the start of a bigger reversal targeting 1820.02 initially.

SILVER (Bullish above 25.0756)

From a technical viewpoint. Silver prices continue to trade within a holding pattern constrained by resistance at the 29.8611 level and support at the 25.0756 level. For now, with price holding above the 50dma also, the near-term bias remains bullish.

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Credit: Tickmill

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