Gold
Gold prices have seen an influx of demand over recent trading as global risk factors have shifted. Moving away from the upward pressure seen recently in response to the increase in tensions between the US and Iran, gold is now seeing safe-haven demand in response to the outbreak of coronavirus in China.
The virus, which is part of the SARs strain of viruses, has been confirmed to have broken out in the city of Wuhan in China. However, the virus has quickly spread, moving first through Asia before travelling as far as the US. There are also tests being carried out on suspected cases in a number of other countries around the globe. With the death toll currently at 81, amidst reported infections of over 3000, there are fears the outbreak will reach the same level of severity as SARs did in 2003, creating a high level of risk for the global economy. With the IMF having recently slashed its world growth forecasts once again, there is a real fear that such an outbreak would heavily damage the already fragile global economy, raising the risk of a return to easing for many central banks. In such conditions, demand for gold would likely increase.
Silver
Metals traders this week will also be closely following the first FOMC meeting of the year, due on Wednesday. While the bank is not expected to adjust rates, the market will be eager to judge if there is any shift in the bank’s guidance. Recent US data sets have been mixed meaning that, for now, the bank is likely to retain its message of remaining in “wait and see” mode. However, with the US-Sino trade deal now signed, there is room for a more optimistic tone from the Fed which could see USD supported in the wake of the meeting, which would lean on gold and silver further.
Technical View
XAUUSD (Bullish above 1499.74)
XAUUSD From a technical viewpoint. Gold continues to find demand above broken 2019 highs and the monthly R1 at 1543.77. 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 pivot at 1499.74
XAGUSD (Bullish above 17.5161)
XAGUSD From a technical viewpoint. Silver is trading back up towards the monthly R1 at 18.4686 For now, price has found support at a retest of VWAP and 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!