Gold
The gold market has witnessed a recovery over early tradingon Monday following a large sell-off last week in response to the cross-market impactof the ongoing COVID-19 outbreak. The reaction in gold has confounded manyplayers over the last week. Despite the heavy sell-off across risk assets lastweek, gold saw a reversal in the safe haven flows which drove the rally overthe last month.
As the global outbreak of COVID-19 worsened, however, theJapanese Yen emerged as the stronger candidate for investors seeking safety oftheir capital. While the JPY had initially been lower on rising fears of arecession there, these losses were quickly reversed as investors flooded backinto the traditional safe have currency amidst cratering prices in the US Dollar,equities and commodities indices – including a rout in gold prices last weekalso.
The severity of the global impact from COVID-19 has now seena significant shift in communications from central bankers with both the Fedand BOJ releasing statements signalling the likelihood of easing in the near future.Such action will help keep gold prices supported in the medium term thoughheadlines around COVID-19 offer highly volatile risks on a day-to-day basis.
Silver
Silver prices are experiencing a mild recovery today also.However, in the context of last week’s historic sell-off (biggest weeklysell-off since April 2013), sentiment remains heavy and the market isvulnerable to further losses. The path of the US Dollar is also important towatch here as any further depreciations should have some limiting capacity fordownside in metals. Dovish comment from Fed’s Powell last week have seen continuedselling in the greenback, which looks likely to develop further. Incoming USdata this week could also exacerbate downside pressure in USD.
Technical Views
XAUUSD (Bearish below 1606.85)
From a technical viewpoint. Gold has reversed from above the yearly R1 at 1625.25 and has now broken down below the monthly pivot at 1606.85. With longer term VWAP still supporting, the move is viewed as corrective now. Any further move lower will bring the monthly S1 at 1527.49 into view as potential support.
XAGUSD (Bearish below 17.30)
From a technical viewpoint. Silver has broken down below the yearly / monthly pivot cluster at 17.30. This area will now be key resistance. With longer term VWAP now negative, we could see further selling at a retest of the level, eyeing a move down to the monthly S1 at 15.70 next.
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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!