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Following the heavy declines seen over February, the metals complex has enjoyed a much firmer start to the month in March. Gold and silver have both seen recoveries off the lows to the tune of around 2% and 4% respectively. One of the key drivers behind the rebound has been the loss of upside momentum in the US Dollar which has been a little lackluster over the last week.

The recent uptick in US inflation has fuelled the view that the Fed is likely to hike by a larger amount in March or, at the least, signal its intent to push ahead with hikes for longer than expected this year. Recent data strength has added to this view with the jobs market growing strongly in January and many other key readings (GDP, retail sales, manufacturing PMI) seen increasing also.

Looking ahead this week, there are plenty of events to keep an eye on for metals traders. Fed chairman Powell begins his semi-annual two-day testimony to the Senate tomorrow. The details are likely to err on the hawkish side and might see metals coming off if USD finds any fresh support in response to the comments. On Friday, the latest US labor market data will be closely watched ahead of the March FOMC. If further strength is seen, this will likely reinforce expectations of a hawkish meeting from the Fed, driving USD higher and weighing on metals. However, should data undershoot forecasts, this might cast more uncertainty, with USD likely to come off a little which would help drive metals further higher.
 

Technical Views

Gold

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The reversal lower in gold saw price correcting sharply within the bull channel off last year’s lows, breaking down through support at the 1871.04 level. For now, the move has stalled ahead of the 1791.63 level and is turning higher again. Bulls need to get back above the 1871.04 level quickly to put the focus back on 1973.51, in line with bullish momentum studies readings.

Silver

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The sell off in gold has seen price moving down through the 22.3205 level to pause at a test of the 20.6398 level support. While this level holds, the focus is on a move back up to challenge the 22.3205 level. However, with momentum studies flat there are risks of a further drop and should we break current lows,19.6131 is the next level to watch ahead of the 17.9275 level down below.

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