China Recommends Ceasing UST Purchases Fuelling Gold Recovery

Gold: Weaker US Dollar Keeps Gold Supported

The price was something of a proverbial roller coaster this week, caught between opposing forces of a weaker US Dollar providing support and a risk-off environment fuelling supply. Despite the Fed being engaged in a hiking cycle, it seems that it is flows rather than rates which are having the most impact. Despite widening US rates, stagnating portfolio inflows have kept the pressure on the US Dollar. While this dynamic has lent support to the US Dollar, surging equity prices have made investors less willing to turn to the low yielding, safe haven asset, as there are better returns to be made elsewhere. Another interesting development over the week, which has seen the price of gold trading higher, was the release of a report by Chinese officials on Wednesday; recommending ceasing UST purchases fuelling Gold recovery. This report put a lot of pressure on the US Dollar and saw Gold trading higher to recoup prior losses.

After testing the rising trend line of the bullish channel running from 2016 lows, the price has since moved back above the key 1294.17 level, which has been a key resistance point over much of last year. Above this level, the focus remains on further topside movement, with the bearish trend line from August 2016 highs.

Silver: Silver Deposit Discovery Weighs On Price

Silver prices began heavier trading this week as, despite the weaker US Dollar, positive investor appetite has weighed in. Adding further weight to the price of silver this week was the report of the discovery of a huge silver deposit in inner Mongolia. Chinese media reported that a deposit containing over 100 million tonnes of silver ore has been discovered in the autonomous region of inner Mongolia.

.After bouncing off the key support at the 15.60s – 80s level, silver prices have since broken back into the contracting triangle pattern which framed price action over most of last year. While price remains above the rising trend line of the contracting triangle pattern, the focus will be on a test to the resistance trend line of the contracting triangle pattern. This pattern framed price action for most of last year.