Gold
The gold market suffered a dramatic decline last week with price reversing from highs above $1700 an ounce to low $1500s an ounce. Gold bulls had been driving price higher as safe haven demand linked to COVID-19 helped keep the market supported. However, as the situation deteriorated further last week, gold prices came under the same pressure seen across asset markets last week. The massive sell-off seen in equities markets has seen increased demand for traders to pull capital out of gold in order to fund margin calls.
The sell off comes despite the Federal Reserve slashing interest rates by a further 100bps overnight ahead of the midweek FOMC meeting. We have now seen a broad range of central banks easing as they attempt to fight back against the downside impact from COVID-19. However, despite this latest bout of easing, gold prices collapsed last week as investors ploughed into the Japanese Yen and Swiss Franc as the preferred safe haven plays. Looking ahead this week, this dynamic could shift as the BOJ is expected to add to the growing list of central banks easing in the face of the rising economic toll of COVID-19.
Silver
Silver prices have fallen heavily lower over the last week, in correlation with the drop seen in the gold market. Silver prices have been heavily impacted by the rout in equities markets. Not only has the need to for investors to pull money out of gold hit silver, so too has the drop industrial equities and the resultant drop in industrial demand for silver. Even the decline in the US Dollar has not been able to stop the sell off in silver which is now approaching a major support.
Technical Views
XAUUSD (Bearish below 1607.06)
From a technical viewpoint. Gold prices have collapsed over recent sessions with price breaking own below the monthly pivot at 1607.06. So far, the monthly S1 at 1525.33 is holding as support. Unless we see a recovery from here a further drop down to the yearly pivot at 1446.74, in line with VWAP which has now flipped negative.
XAGUSD (Bearish below 13.9443)
From a technical viewpoint. Silver prices have seen heavy declines over recent sessions, breaking back down beneath the bearish trend line and now back below the yearly S1 at 15.0000. Price has now also broken below the 13.9443 multi-year support level. The outlooks remains bearish here while price remains below here.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!