Gold
The gold market has seen steady demand in recent trading as rising global uncertainty linked to the corona-virus outbreak continues to drive flight-to-safety among investors. Last week, the virus was confirmed to have spread to both the US and the UK with the number of deaths attributed to the virus almost reaching the 200 mark. Over the weekend, the virus claimed its first life outside China and, worryingly, health experts have noted that the virus is mutating – meaning it can now be spread before a carrier shows any symptoms.
The World Health Organisation has now classified the virus as a global emergency, fuelling fears that the outbreak will soon be as severe as the SARS episode in 2003. That outbreak saw 800 people die globally over a 4 month period. With the coronavirus still in its first month, there are fears that the ongoing uncertainty will result in damage to the global economy, as was experienced in 2003. With the global economy still fragile on the back of the two-year US-Sino trade war, the impact could be incredibly costly, likely to drive further safe-haven support for gold in the near term.
Silver
The silver market has seen greater volatility than gold. Despite its typical correlation with gold prices, the impact of the corona-virus outbreak is weighing on industrial demand due to silvers typical industrial usage. The downturn in US industrial averages has leaned heavily on silver prices. However, the late-week rally in the gold market helped silver prices recover, though ultimately they still ended the week lower.
The fall-back in the US dollar last week has also helped metals prices. The Federal Reserve held its headline policy rate unchanged though struck a more cautious tone with chairman Powell acknowledging the risks from the corona-virus outbreak. Should the outbreak worsen and uncertainty continue to build, we could see Fed easing expectations creeping back up.
Technical View
XAUUSD (Bullish above 1499.74)
XAUUSD From a technical viewpoint. Gold prices are rallying firmly above the monthly R1 at 1543.7 and fast approaching the YTD highs. With longer-term VWAP positive, upside bias remains intact, with a break above the yearly R1 at 1625.26 the next objective. However, if we do see any pullback, look for support into the monthly R1.
XAGUSD (Bullish above 17.5161)
XAGUSD From a technical viewpoint. Silver prices remain well support, with a focus on a test of the monthly R1 at 18.4686 next. With longer-term VWAP positive again, further upside looks likely. However, if we do reverse lower the next area to watch for potential demand will be the cluster of support around the monthly /yearly pivot (17.5161 – 17.2889).
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!