Gold

The gold market has broken out to its highest levels since mid-2012 as the new trading week gets underway. A backdrop of stark, dovish warnings from central banks about the last downside impact of COVID-19 as well as increased uncertainty over US/China relations is creating strong safe-haven demand for gold.

Last week, the chairman of the Federal reserve Jerome Powell warned markets that while the Fed is not discussing negative rates, it has adjusted its view for the US economy. The Fed now expects the recovery from the COVID-19 lock-downs to take much longer than initially anticipated. This message comes on the back of April jobs data which noted the largest monthly job loss on record (NFP) with the unemployment rate ballooning higher to 14.7% from the prior month’s 4.4%. With the Fed reiterating its commitment to monetary policy easing, Powell also called on more fiscal support from the government which the bank needs in order to boost its economic efforts.

US/China relations have also been driving price action recently. With US rhetoric becoming increasingly aggressive towards China, the market is concerned about the implications for the (as yet) continuing trade negotiations. If these negotiations are cancelled (as Trump has threatened) and trade tariffs are resumed and increased, this would have heavy repercussions for the global economy which has already been significantly weakened by the current crisis.

Silver

The silver market has been helped firmly by the moves in gold over recent sessions as it too sees a breakout. Along with the support from its correlation with gold, silver has also been lifted by better demand expectations linked to the re-opening of economies across the globe as lock-downs continue to ease. While there is still uncertainty in the outlook, for now, the pickup in activity is helping lift silver prices.

Technical Views

GOLD (Bullish above 1747.15)

From a technical viewpoint. Gold has now broken out above the prior 2020 high watermark to trade fresh yearly highs. Price is currently stalled at the monthly R1 (1765.40) though, while above the 1747.15 level, and with VWAP supporting, continued upside is likely with the 2012 highs of 1790.76 the next resistance to watch. Caution here, however, as momentum studies are showing bearish divergence on the breakout.

Precious Metals Monday 18-05-2020

SILVER (Bullish above 15.7376)

From a technical viewpoint. Silver has broken above the 15.7376 resistance and is now retesting the broken yearly pivot at 17.2802. If price clears above here the next upside target will be the completion of the current symmetry projection swing into 18.7870 which is also the 2020 highs and a primary level to watch for medium term price direction.

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