Precious metals prices took a hit in the wake of the hawkish surprise in the FOMC meeting a couple of weeks ago. However as the dust has settled, despite the US dollar continuing to strengthen, a basis of support is forming on precious metals. The building blocks for a recovery are being laid.
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USD strengthening is failing to weigh precious metals down.
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Gold is building from support at $1760/$1765 but needs to do more for sustainable recovery.
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Silver is still consolidating around the mid-range pivot at $26 but improving momentum hints at a potential rebound.
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Platinum needs to break key resistance at $1109 whilst Palladium looks increasingly strong again.
Gold is fighting against USD strength
Gold continues to have a strong negative correlation with the US dollar (USD). However, it has been notable in the past week that as the USD has climbed once more, the Gold price is still being supported, even rallying in the past couple of sessions.
This show of fight from the gold bulls is encouraging.
This is also coming as “real” US bond yields are falling back (as US Treasury yields have slipped in recent days). The correlation between Gold and real yields is historically negative and falling yields should continue to support gold.
Gold technicals are improving
On the technical analysis, we see that Gold (MT5 code: XAUUSD) has been rallying for the past few sessions (and also higher today ahead of Nonfarm Payrolls). There is a slight positive divergence with the RSI too which suggests that selling pressure has waned. There is still plenty to do for recovery to take hold though.
The four hour chart shows improving momentum but also resistance between $1790/$1795 to overcome. However, a decisive move above $1795 would complete a small base pattern and imply $1820/$1825.
Silver outlook beginning to also improve
The outlook for Silver (MT5 code: XAGUSD) is also improving. Again the RSI momentum is ticking higher and has room to unwind back towards 50 (which seems to be a pivot area for momentum).
The market is now looking to hold consistently above $26.00 which has long been a pivot within the medium-term broad range between $24.00/$28.80.
There is resistance to overcome at $26.30/$26.40 but there seems to be an appetite to support weakness now. A break above $26.40 opens recovery into the key band of resistance $26.60/$27.00. We are keeping an eye on holding the $26.00 pivot in the wake of today’s payrolls report.
Platinum has more to do but Palladium remains strong
There is a lot more for Platinum (MT5 code: XPTUSD) to do to suggest this is something more than just another rebound within the bear phase. The confluence of resistance from a key downtrend since May, the falling 21 day moving average, and also the recent rally high all coming in around $1109 needs to be overcome.
Moving above 50 on the RSI would be a key indication that the bulls are finding their feet again. In the meantime, holding above $1070 (pivot support on the 4 hour chart) will be a continuation of the improvement.
Finally, we look at Palladium (MT5 code: XPDUSD) which has had an enormous rebound in the past couple of weeks. It has also regained all of the downside move in the wake of the Fed meeting. Momentum is strong with RSI at 6 week highs and the bulls are again looking higher today.
Holding above the support band $2665/$2715 will now be a key aim for the bulls to sustain recovery momentum. Resistance $2830/$2869 needs to now be overcome to push higher once more.
Conclusion
Despite the dollar continuing its recovery, there are signs of firming support for precious metals that could lead to a near-term rally. Palladium looks to be the best performer, whilst both Gold and Silver are also well placed. However, Platinum has more to do to suggest that a sustainable recovery can take hold.
