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Precious metals extend gains as dollar selling resumes

Fawad Razaqzada Fawad Razaqzada 05/01/2021
Precious metals extend gains as dollar selling resumes Precious metals extend gains as dollar selling resumes
Precious metals extend gains as dollar selling resumes Fawad Razaqzada
Unlike most other assets, gold and silver managed to hold on to their gains in the first trading day of the year on Monday following a sharp reversal in the second half of the day for risk assets. Precious metals were initially supported by weakness for the dollar, but later came off their best levels as the safe haven greenback found support on the back of a sharp reversal for the stock markets. Still, both gold and silver closed the session higher and the metal have now extended their gains. Investors were spooked on Monday by the latest upsurge in virus cases, deaths, and new lockdowns for the UK. This morning, though, the prevailing trend seems to have resumed. Stocks have rebounded, gold and silver were on the rise and the dollar index was once again on the backfoot. Part of the reason behind the rebound is a direct result of UK Chancellor Rishi Sunak unveiling £4.6billion of bailouts for lockdown-stricken businesses. But with the vaccines being rolled out, a lot of investors are continuing to ignore the short-term impact of the latest lockdowns, and look forward to more normal times ahead.

The latest help from the UK government adds to the previous government stimulus and cheap central bank money flooding the financial markets. In 2020, risk assets and precious metals rallied sharply following the initial lockdowns in March, as governments and central banks unleased record stimulus packages and other measures to support the recovery. Their support meant that investors would largely shrug off further rounds of the virus resurgence and lockdowns. That’s exactly how the markets are behaving once again today, with both the pound and FTSE rebounding. Investors are thus continuing to buy the dips in stocks as well as traditional haven assets like gold and silver, all thanks to government and central bank support.
 
Compared to gold, silver is continuing to outperform.  The latter’s dual roles as a precious metal and an industrial material makes it more appealing during times when economic activity is expected to rebound.  As well as other industrial uses, the ongoing drive towards cleaner energy means silver will also likely find support from the solar energy sector. China has promised to go carbon neutral by 2060, while many European countries have set themselves much tighter deadlines.

So, silver should remain supported from a macro point of view. From a technical perspective, the metal continues to make higher highs and higher lows after recently breaking above its short-term bearish trend line which thus ended months of side-ways consolidation. As things stand, silver could be heading to a new multi-year high above $30 in the not-too-distant future.

SilverSource: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor follows his role with TradeStar.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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