Expert Investor
Author: Mauricio Carrillo
Senior Reporter
Mauricio Carrillo

Gold on Consolidation Mode Before Attacking The 1,750; Silver on Fire

Gold and silver are trading positive on Wednesday amid optimism in markets due to a potential coronavirus vaccine and hopes for a new cash injection in the United States economy.

Also, plans for the reopening of regional economies in the United States and Europe are fueling markets but also safe investing assets such as gold and, therefore, silver.

One of the main characters in the current situation is the dollar and its weakness. The greenback is trading under pressure due to news about a new round of checks in every household in the United States plus a new CARES bill including money for middle and big companies.

Additionally, Federal Reserve Chairman Jay Powell said during the weekend that the bank of the American people has more ammunition to fight against COVID-19 impact in the economy.

In that framework, the dollar index is trading 0.53% down on Wednesday with the unit falling for the third day to test 99.00 prices.

Gold is trading sideways on the day as it is consolidating the $1,725 floor set in the last three sessions. Silver is testing highs since March 9, and palladium has recovered the $2,000 mark and it is now testing the $2,100 resistance.

COVID-19: Between Vaccine Hopes And Almost 5 Million Cases

COVID-19 Dashboard

As reported by Expert Investor yesterday, Biotech company Moderna reported positive data on an early-stage coronavirus vaccine trial. While Moderna shares have been in a roller coaster following the news, the market welcomed the information, and major indexes have been moving positively with renewed optimism.

However, after 95,000 new cases were confirmed on Tuesday, the average number of daily cases remains at 90,000 COVID positive patients. In other words, the advance of the virus has not slowed down worldwide.

According to the latest update of the COVID-19 Dashboard by the Center for Systems Science and Engineering at Johns Hopkins University, the number of globally confirmed cases of coronavirus has exceeded 4.9 million people in 188 countries.

By country, the most affected continues to be the United States, which with more than 1.5 million infected persons and close to 92,000 deaths, represents 30% of cases worldwide.

Russia follows the US with 308K cases and Brazil, where the situation is getting out of control, with 271K diagnosed cases. Then, there is the United Kingdom with more than 250,000 people infected, but the Kingdom is the second with the highest number of deaths: 35,000 fatalities.

In that framework, the market has welcomed vaccine news, especially after the movements to reopen regional economies in the United States and Europe. However, the concerns remain there as other countries that opened economies last month have experienced spikes in COVID-19 cases.

So, gold is taking advantage of a weak dollar but also from its condition of safe investment in a volatile environment and fresh cash coming out.

Gold Ready to Attack The $1,750 Level

Gold Daily Chart

Gold is trading slightly positive but mostly on consolidation mode above the 1,725 area on Wednesday. With all the noise surrounding markets, gold traders are accumulating forces and gaining momentum to attack the 1,750 level.

A close above 1,750 would provide bulls with more reasons to buy the metal and push it to new highs above the $1,765.25, May 18 maximum.

Kitco Analyst Jim Wyckoff believes that the uptrend in gold is healthy, at least in the middle term. He said that a close above 1,788 is crucial.

Technically, the gold bulls have the solid overall near-term technical advantage amid an uptrend on the daily bar chart. Bulls' next upside price objective is to produce a close in June futures above solid resistance at the April high of $1,788.80. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,666.20.

Silver Extends Rally And Trades at Fresh Highs Since Early March

Silver Daily Chart

Silver is also trading positive on Wednesday, but the XAG/USD picture is even more positive than the gold as the pair has been in a rally mode since May 13. As a matter of context, silver prices have risen around 14.7% in just one week.

XAG/USD is now testing March 8 highs at 17.60, but market conditions suggest the pair will break the resistance and go for another target at 18.00. Then, 18.80 would be a critical frontier.

According to Wyckoff, silver has a solid overall near-term bullish picture.

Silver bulls' next upside price objective is closing prices above solid technical resistance at the February high of $19.07 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $16.50. First resistance is seen at the overnight high of $18.155 and then at $18.50. Next support is seen at the overnight low of $17.755 and then at $17.50.

Meet The Author
Mauricio Carrillo
Mauricio Carrillo
Senior Reporter

Mauricio is a newer member of the team and a very welcome addition. He is a financial journalist and trader with over ten years of experience in stocks, Forex, commodities, and cryptocurrencies. This experience means he has an excellent understanding of the markets and current events.

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