By Orbex

Gold

Gold prices continued their recent rally this week with the yellow metal heading back up towards the 2020 highs. The recovery in asset markets continues to support the upside in gold. Gold has now almost totally reversed the sell-off seen over March in response to the outbreak of the COVID-19 virus.

Over the last two weeks, risk appetite has stabilized. Breaking from the typical correlation seen, gold prices have been trading higher in tandem with equities markets.

The main catalyst behind the drive higher in asset markets this week was the latest announcement from the Fed. In yet a further unscheduled announcement, the US central announced a $2.3 trillion loan program. In a statement issued on Thursday, Fed Chairman Powell said:

“Our country’s highest priority must be to address this public health crisis, providing care for the ill and limiting the further spread of the virus”.

Powell continued, saying:

“The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”

This latest announcement comes on the back of the Fed recently announcing its decision to start running limitless QE. Gold prices are now well supported in the midst of this massive injection of liquidity. It looks set to keep inflation expectations anchored firmly lower over the rest of the year.

Gold Market Approaching Key Resistance

The yellow metal prices continue to hold above the bullish channel which has been acting as support on recent retests. While above here, focus remains on a break of the 2020 highs at 1700. Next with a focus on a test of the mid-2012 highs (1750.67) next. However, bearish divergence in the RSI indicator warrants attention. Unless we move above the 1700 level, we could see some short term selling from the level.

Silver

This week, silver prices have been equally well supported. The ongoing rally in equities helping lift silver prices. Given its frequent industrial usage, silver prices tend to be impacted by movements in key industrial indices. With US industrial benchmarks continuing higher this week, supported by the broader recovery in asset markets, silver prices have room to continue higher here

Silver prices Trading Within Rising Wedge Pattern

Silver prices continue to trade higher with the rally above the 14.3722 level continuing to gather pace. However, technical analysts will note that the recovery is framed by a rising wedge pattern. This pattern is currently raising risks of a reversal lower. The 16.3502 level will now be a key pivot point for silver. The level will either provide the platform for a further recovery or the stalling point for the current recovery.

By Orbex