The gold market has given conflicting signals over recent weeks. Following a breakout to highs of 1611.39, not seen since early 2012, market reversed heavily over last week, trading lows of 1536, before reversing higher.
The root of the fluctuations in the gold market has been the shifting situation with regard to the recent tensions between the US and Iran Gold prices rocketed above the 16 level amidst increased fears that the two countries were on the brink of a full scale military conflict following Iran’s retaliation attack for the US killing of and Iranian general. However, with the US having diffused the situation, the threat of such a conflict receded, allowing equities markets to trade higher again, taking the safe haven demand out of gold.
A strident recovery in the US dollar last week also weighed on gold prices. A pair of better than expected data releases on Thursday (retail sales & Philadelphia Fed manufacturing index) helped the Dollar recover from initial weakness seen on the back of a weaker-than-expected CPI print. A quieter data schedule for the US might see diminished focus on the dollar this week though we could see some volatility around the Trump impeachment trial which begins On Tuesday.
In tandem with gold, silver prices saw volatility last week too, recovering from initial lows on the week to end the week nearly flat. The current themes of a fall-back in US-Iran tensions, as well as optimism over US-Sino trade negotiations are driving price action. In the near term, with no key US data due this week, trade-deal and Trump headlines are likely to remain the main drivers for metals as they fluctuate around changes in risk appetite.
XAUUSD (Bullish above 1499.74)
XAUUSD From a technical viewpoint. Gold continues to hold just above broken 2019 highs and the monthly R1 at 1543.77. With longer-term VWAP positive, upside bias is not yet broken. However, we could see a deeper pullback to the monthly pivot at 1499.74 with momentum studies showing room for a correction also.
XAGUSD From a technical viewpoint. Silver is still holding below the monthly R1 at 18.4686 for now, following the rejection there last week. For now, price has found support at a retest of VWAP. However, price action points to the risk of a further break lower. Below here, the next area to watch for potential demand will be the cluster of support around the monthly /yearly pivot (15.5161 – 17.2889).
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