The yellow metal has been firmly lower this week, in response to the rally which has taken place in the US dollar.
It seems that amidst the building fears around a second wave of COVID-19, safe haven flows have gravitated back towards the dollar.
Fresh lockdowns have been announced in France and Germany this week. And there are expectations that other countries, including the UK, will soon follow.
It seems the market is shifting back towards the dynamic seen during the height of wave one of the pandemic. Then, too, equities and gold fell in tandem as the dollar traded higher. Interestingly, the dollar looks to also be deriving some support from better recent polling results for Donald Trump.
The US president has seen a small increase in his national rankings over recent days. He has also made gains in battleground states, with Florida now switching in favor of Trump.
At the very least, the dollar looks to be gaining on the reduced likelihood of the Democrats gaining control of both the Senate and the White House.
As we head through to the elections next week, the market will become highly sensitive to polling results. And we can expect plenty of volatility in reaction to the elections, regardless of who wins.
Gold Reverses From Key Resistance
Gold prices have once again turned lower from the 1919.92 level which continues to act as a firm resistance. While below here, we can expect a test of the 1826.71 level.
Bulls will need to defend this level to keep the medium-term view bullish. A break below there would affect a shift in view towards gold.
Silver prices have been knocked lower this week also. The metal has been weighed upon not only by the downside moves in gold and upward action in the US dollar but also by the sell-off in equities markets.
Last week’s manufacturing readings showed that the factory sector has seen a heavy loss of momentum in the UK and the US. This raises concerns over the demand outlook for silver in the near term.
With European countries now starting to move back into lockdown, the outlook for silver doesn’t look too encouraging here.
Silver Turning Lower Again
Silver prices have once again failed to break above the 25.1018 level resistance. And, while below there, the market remains vulnerable to a further move lower towards the 20.4050 level next.
To the topside, any break back above the 25.1018 level, will turn attention back to the 27.4502 level next.