Metals Move Higher As USD Sells Fall

Gold

The yellow metal has been recovering some of the losses seen over the prior week.

Weakness in the US dollar has helped underpin gold.

The greenback has been lower over the week despite better than expected data. The final Q2 GDP reading came in at -31.4% versus -31.7% expected.

Meanwhile, pending home sales jumped to 8.8% over the last month, beating estimates of a 3.1% reading and marking a firm improvement from the prior month’s 5.9% reading.

Midweek, US PCE data printed 1% last month, beating estimates of a 0.7% reading while unemployment claims came in at 837k, below the 850k reading expected.

There were some weak spots, however. The ISM manufacturing reading came in at 55.4m undershooting expectations of a 56 reading and marking a decline from the prior month’s reading of 56.

Gold has also been supported over the week by the shift in safe-haven flows away from the US dollar as markets react to increasing uncertainty ahead of the US elections.

A messy and chaotic first presidential debate this week has done little to offer clarity on who is likely to win the election, though Biden maintains a slender majority in most polls following the event.

Gold Prices Capped At Resistance

Following the recent breakdown below the rising trend line from 2020 lows, gold prices were able to find demand as they approached the 1826.71 level support.

However, the current rally has not yet taken price back above the 1919.92 level and, while below there, the near term bias remains skewed towards further corrective action lower.

Silver

Silver prices have largely tracked the moves in gold this week, taking advantage of the shift lower in the US dollar. Strength in the greenback has weighed on price over recent weeks though silver looks to be carving out a short term base here.

The rally in equities prices has also lent support to silver. The industrial demand picture for silver remains a concern.

However, given the rising fears around the need for a return to lockdowns as globally, the pandemic looks to be increasing again.

Silver Supported By Rising Trend Line

The recent sell-off in silver has seen price testing the rising trend line from 2020 lows with price now sitting back atop the 23.52 level.

While price holds above this level, there is scope for silver prices to advance again with the 25.97 level the main topside area for price to break.

To the downside, should price slip back below the rising trend line, the next big support zone to watch is down at the 19.62 region.