Gold Soars As Risk Sentiment Worsens On Weak US/China Data

Gold

The yellow metal had another bumper session this week, trading up to levels not seen since mid-2018, as the US Dollar weakened further. Despite the Fed having raised rates for a fourth time in 2018 at its last meeting in December, gold prices have since enjoyed a strong rally on expectations that the Fed will now pause its hiking program.

Weaker US data for December has added further bearish pressure to USD. In the first readings for December, both consumer confidence and IHS market manufacturing printed below expectations falling to 36-month and 15-month lows respectively. The data highlights the diminished outlook for US economic activity over 2019 which has lead to a resurgent appetite among gold traders and investors looking to use gold for its safe-haven status. At the Fed’s December meeting it lowered its dot plot forecast for 2019 from 3 hikes to 2 hikes.

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forex gold

Gold prices are now firmly back above the broken bullish trend line from 2015 lows and are fast approaching structural resistance at the 1295.29 – 1304.36 region where we have confluence between prior highs and lows. Above here, the focus will be on a retest of the key 1366.80 – 1375.87 level which has been high over the last four years.

Silver

Silver prices this week displayed a strong correlation with gold, rocketing higher as the yellow metal took off. While equity price declines can sometimes have a dampening impact on silver due to its uses in an industrial capacity, this week, the lower US Dollar helped light a fire under silver, taking it back up to mid-2018 levels.

(Click on image to enlarge)

forex silver

After stagnating for months near the main support of 1396, silver prices have since exploded higher and broken back above the key 15.1800 – 15.5700 level resistance, confirming a bullish shift in momentum. Prices are now fast approaching the 16.2267 region where we have confluence between a raft of prior swing lows and the long-term bearish trend line from 2016 highs.

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