It looks like the trend of rising prices of stocks and precious metals, and a falling dollar, is about to resume.
Precious metals turned higher just before the open on Wall Street, before rising further along with the
rebounding equity markets. Gold and silver prices had been under some pressure of late, due among other things to concerns over a slower recovery in demand but mainly because of the rebound in the US dollar. However, as bond yields have remained low, the selling pressure for gold and silver have not been too strong.
Investors remain hopeful that an effective vaccine will soon become available and convinced that, in any case, central banks and governments will be ready to provide more stimulus and debase their currencies. Against this backdrop, gold and silver remain fundamentally supported. Indeed, the focus will be on another major central bank on Thursday as the European Central bank takes centre stage. Expectations are growing among analysts that the ECB will provide a dovish assessment of the economy and in doing so trigger speculation that more QE would be on the way later in the year. If so, gold and silver should benefit on the back of potentially more weakness for European bond yields.
Gold’s strength was tested many times over the past few weeks as the bears attempted to push it back down below its old record high of $1920ish that was hit in the year 2011. The sellers had many attempts to break this level down. However, as they repeatedly failed to do so, prices have charged higher again:
Source: TradingView.com and ThinkMarkets
The daily chart of gold is now looking quite constructive again, with prices no longer at “overbought” levels according to the popular momentum indicators such as the RSI. Thus, more bullish speculators may now step in and drive the metal further higher in the coming days. However, if prices were to break $1920 key support decisively, then at that point I will drop my short-term bullish on gold.