Gold

The gold market remains caught between offsetting factors which has seen price action struggling to make a directional move of late. On the one hand, the weakness in the US Dollar is creating support for gold prices, while the continued upside in equities is drawing support away from the low yielding, safe-haven asset.

The latest round of US inflation readings delivered last week came in below expectations with core inflation falling back to 0% month on month, from the prior month’s 0.3% reading. The reading further endorses the view that the fed is unlikely to shift out of its easing approach anytime soon. Furthermore, with president Biden’s $1.9 trillion fiscal stimulus package expected to pass by March, the Dollar is likely to remain weighted to the downside over the coming months, keeping gold prices supported.

The upside move in equities is proving problematic for gold bulls. While the weaker Dollar is creating support, the strength in equities markets is offsetting this weakness. Optimism linked to the ongoing vaccination effort, as well as expectations of forthcoming stimulus, is keeping equities markets well bid, meaning that gold is likely to struggle to make a break higher here.

Silver

Much in the same way that gold has struggled for direction silver prices have been equally digested. However, the weakness in the Dollar as well as the rally in equities is helping keep the silver market better support than its gold counterpart. The focus this week will be on the next wave of PMI readings, particularly manufacturing data. The resilience in the global factory sector has been a key source of support for silver and with optimism around the vaccine push increasing here, this looks likely to continue, keeping silver prices supported in the near term

Technical Views

GOLD

Gold prices recently broke down out of the large contracting triangle pattern which has framed price action over recent months. However, the downside move failed to break the 1803.51 level, which remains intact as support for now. While this level holds, the near-term bias remains neutral-to-bullish. A break of the support level, however, will bring deeper support at 1764.98 into view, a break of which could signal the start of a bigger bearish reversal in gold.

SILVER

Silver prices continue to grind higher once again following the downside correction from the move above the 29.8611 level. While price holds above the 25.0756 level, the breakout above the bear channel remains valid, keeping the near term bias skewed towards further upside.

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