The yellow metal failed to continue its recent upside streak this week and while still broadly supported, upside momentum has certainly waned. One potential reason for this loss in momentum is the shift seen this week in the COVID-19 landscape.
Gold has been well bid over recent weeks amidst rising fears of a second wave of the virus which have translated into an increased safe-haven bid for gold. However, various reports this week linked to vaccine development have allayed some of these concerns. This has created a reduced safe-haven demand for gold.
Pfizer and German biotech firm BioNTech announced that they have been given an FDA fast-track for two of their candidate vaccines currently under clinical trials. If successful, the two firms plan to produce around 1 million units of the vaccine by the end of the year. By the end of 2021, they project a further 1.2 billion units will be produced.
Despite the better risk environment which has weakened demand for gold, continued weakness in the US dollar has helped keep gold supported at current levels, sitting just below last week’s highs. The US dollar has remained soft this week despite a better set of retail sales. The figure rose to 7.5% last month, above the expected 5% reading.
However, unemployment claims were seen rising again over the week to 1.3 million vs 1.25 million expected. This kept the dollar anchored lower.
Gold prices have remained above the bullish channel which was broken last week with price consolidating above the 1787.85 level. While price remains above here, focus is on further upside with the 1826.7 level the next upside level to watch.
To the downside, a break of the 1787.85 level will turn focus onto the 1750.67 level.
Silver prices have seen better upside movement this week. Strength in equities and weakness in the US dollar have combined to see silver breaking out to further highs. The continued easing of lockdown restrictions is continuing to support the demand outlook for silver. This has lead to higher prices and while the dollar remains weak, the outlook for silver remains bullish.
Silver prices have broken out above the 18.8405 level this week. While above here, focus remains on further upside with the 2016 closing highs at 20.4050 the next key resistance level to watch.
However, with the RSI showing bearish divergence, traders should be aware of downside risks. Any break back below the 18.8405 level will open the way for a deeper correction.