The yellow metal took a heavy knock lower this week as the US Dollar continued its path higher following some stagnation last week. The current dollar drive comes on the back of the recent March FOMC meeting. This saw the Fed taking a dovish turn in its economic assessment and outlook. The USD was heavily sold initially in response to the meeting. This is because The Fed said that it no longer anticipates raising rates this year and revised its growth forecast lower. However, following the meeting, the USD quickly rebounded and has gone on to post a second consecutive week this week.
Despite dovishness from the Fed, traders still prefer USD out of the G10 currency bloc, keeping the greenback supported. Other G10 central banks have yet to tighten at all in the current cycle. Furthermore, growing concerns around economic strength in Europe as well as around ongoing issues such as Brexit, have kept EUR and GBP weighed down. This has allowed for USD upside to materialize.
Risk appetite remains fairly resilient at the moment too, also weighing on gold prices. Equities have managed to recover off lows this week and trade mildly to the upside. It seems that traders are remaining optimistic about ongoing US/China trade talks. US delegates are currently in Beijing, eyeing a potential deal on the horizon which could help bring about better global growth.
However, there is plenty of two-way risk around the ongoing trade negotiations as well as Brexit. Gold prices can quickly find strong safe haven inflows when headlines turn negative.
The technical landscape in gold highlights strong downside risks. After breaking above the 1280.58 level to trade highs of 1346.40, gold prices since reversed and traded back to retest the level which held as support. Another run higher failed to get back up to 2019 high. And we are now potentially seeing a double top, with a large bearish engulfing candle. A further break of the 1280.58 level from here could spell serious trouble for gold with 1243.11 the next key level to watch.
Silver prices have been equally hammered this week. They’ve tracked the moves in gold, as a stronger US Dollar and global growth concerns have taken their toll. For now, this week’s US/China trade talks are likely to dictate the outcome of the near term picture for silver. If we see some positive headlines and the market can get a real sense that talks are moving closer towards a deal, then silver upside could rematerialize. However, if we see a muted outcome and focus remains on USD strength, then we are likely to see further silver weakness in the coming sessions.
Silver prices are now once again retesting the breakout base around 14.9705 which is holding as support for now. While above here, prices are likely to range between this level and the 15.5359 level, with the bearish trend line from 2016 highs just above. Below this level, however, and the next support zone to watch is the 14.0311 region.