Metals Lower Following Mid-Week Sell-Off

Gold

Gold prices have been lower over the week following a strong sell-off on Wednesday. The market shed 2.4% in response to the move higher in the dollar midweek.

The risk sentiment backdrop has generally remained against gold this week with markets continuing to find demand in response to incoming COVID vaccine news. With vaccinations now underway in the UK and due to start shortly in the US and Canada, the broader outlook for risk assets has improved. In turn, this has created a dampening effect on gold.

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However, there have been some issues: UK regulators have issued a warning to those suffering from severe allergies, warning them not to take the drug due to the serious side effects suffered by 2 NHS nurses.

For now, the news has not materially impacted the outlook for the uptake of the vaccine. However, this could change should further such incidents occur, leading to deeper negative news flow.

Expectations of further central bank easing are helping to offset the downside in gold, however.

The ECB added to its bond-buying this week and with the Fed, the BOE, and the BOJ all due to meet next week, the risks of further central bank easing should see gold prices underpinned in the near term.

Gold Back Above Key Support

(Click on image to enlarge)

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Following the breakdown below the 1826.71 level and the bottom of the falling wedge pattern, gold prices have since recovered and are now trading back above the level. While this level holds as support, the market is open to further appreciation.

The next topside level to note is the 1919.92 level where the top of the falling wedge pattern sits also, creating further resistance.

Silver

The silver market has also been lower over the week, tracking the moves in gold. Despite the broader weakness in the US Dollar which has underpinned prices, silver has been let down this week by the softer moves in equities markets. Ahead of the Brexit deadline and with talks yet to yield a deal, the industrial landscape is looking highly uncertain. Next week, traders will be focusing on the incoming manufacturing PMIs for the UK, US, and Europe.

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