Muted Moves In Metals Following Heavy Sell-Off

January 15, 2021

Gold

Following the volatility last week as gold sold off in response to the USD, gold prices have had a much quieter week.

The gold market has traded a very narrow range at the foot of last week’s decline, hugging the 1826.71 support. This week, the rebound in USD has been the main barrier to any recovery higher in gold prices.

The dollar has been trading higher amidst the greater political clarity following the democrats winning the Georgia state run-offs.

A better than expected set of average hourly earnings last week has also helped support the dollar.

Some parts of the market judge that the rebound in the US, along with US fiscal stimulus, could fuel the Fed to begin removing monetary easing quicker than forecast.

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Just this week, we heard two Fed officials suggest that the bank could start to taper off asset purchases later this year. This is if the US rebound strengthens, as projected, over H2.

However, there’s still plenty of uncertainty around COVID. This is evident by the negative jobs number in December.

Therefore, the dollar is still subject to downside risks. Safe haven inflows are likely to continue offsetting any further downside in gold, currently.

Gold Trading Back in Bearish Channel

Gold prices reversed heavily following the move above the 1919.92 level.

Price is now trading back inside the broken bear channel and is currently sitting on support at the 1826.71 level.

Should price break below here, the next support level to watch will be the November 2020 lows around 1764.18.

To the topside, if price moves back above the channel high, the 1919.92 level remains the key marker to watch.

Silver

Silver prices have largely tracked the moves in gold this week, with price holding towards the bottom of the sell-off from last week.

However, silver prices have fared a little better than gold this week, with silver helped by the continued uptick in equities prices.

The focus on a much larger US stimulus package as a result of the democratic sweep is helping lift equities prices with the rally in industrial stocks offering a boost for silver.

This theme looks likely to continue in the near term as further details of the proposed stimulus package come through when Biden takes office next week.

Silver Holding Above key Support

The sell-off in silver prices has seen the market moving back below the 25.975 level.

However, for now, price remains above the broken bearish channel and the rising trend line from 2020 lows. While this support area holds, the focus is on further upside in the near term.

By Orbex