The yellow metal has had a much quieter week in terms of volatility and has recovered from earlier weakness to end the week in the green.
The ongoing coronavirus spread has seen residual safe-haven demand for gold despite equities shrugging off the risks to continue higher. Recent reports suggest that the spread of the virus is slowing down. And, the market is hopeful that current clinical trials underway in China will produce a vaccine soon.
On the US data front, a weaker than expected CPI reading on Thursday (0.1% month on month vs 0.2% expected) has also helped keep gold demand intact.
US data, as a whole, has been strengthening recently, though stickiness in inflation (which is still subdued) means that the question of a Fed rate hike is still very much premature.
For now, gold prices remain in the upper part of the bullish channel from 2018 lows. Price is still holding above the 1554.69 level support, for now, suggesting continued upside.
However, weakness in the RSI indicator raises the risk of a reversal lower. If price breaks back below the 1554.69 level, the focus will turn to the 1481.93 level as the next support, ahead of a test of the rising channel low.
Silver prices have also posted a firm recovery this week. They bounced off lows seen earlier in the week to trade back up to around the opening price, as of writing.
The rally in USD is limiting upside for metals as the dollar continues to trade higher, supported by a slew of better data recently.
The coronavirus outbreak remains the main market theme. If a breakthrough is made, in terms of finding a cure for the virus, this will likely fuel a sharp relief rally in equities.
Although gold might lose out in these conditions, due to reduced safe-haven demand, silver might actually hold up given its ties to the industrial sector. The loss of activity in China during the outbreak has been a principal headwind to silver and we could see a firm recovery if a vaccine is announced.
Silver prices have been holding above the 17.3408 level for the last six week, keeping focus on further upside for now. However, while the 18.63 level remains intact, we could still have a lower high in place, suggesting a move lower is coming. Bears will need to see a break below the rising trend line, targeting a move down to the 16.5136 level next.