The metals market is seeing a positive start to the week, albeit a mostly quiet one for gold. Both gold and silver are trading in the green across the European open on Monday, underpinned by the weakness in USD. Following last week’s correction lower, DXY has failed to recover and is now under pressure once again. If we see USD trading further lower this week, this will allow metals greater room to move higher.

The reaction lower in USD has primarily been a function of the volatility we’ve seen elsewhere in the market. With record moves in JPY and GBP recently, and with a material change in ECB expectations, focus has shifted away from USD. This week, traders will be looking to the latest set of US labour market reports on Friday which hold the potential to be the next key directional catalyst for the greenback.

While USD has moved lower recently, its important to remember that hawkish Fed expectations are now well anchored. We heard from various Fed members last week reaffirming their support for continued rate hikes. Indeed, one of the more interesting comments came from Fed’s Brainard who said that US rates will need to remain restrictive for some time, advising that the Fed was keen to make sure that rate hikes were not undone prematurely on the back of this tightening cycle.

Technical Views

Gold

Gold prices are sitting in the upper half of the local bear channel following a bullish reversal last week off the 1634.74 lows. With both MACD and RSI turning positive here, the big focus is on the bear channel top and the 1679.77 level. This is a key resistance level for gold, marking the initial 2022 lows the breakdown at the end of September. Back above here, the 1722.37 level is the next key resistance to note.

Silver

Price action in silver is starting to look interesting here. Following the initial breakout above the bear channel, silver prices were seen falling lower into the end of September. However, prices are now starting to recover again and the market is pushing higher. The key level to watch now is the 19.5643 handle, if bulls can break above here, we likely have a base in place putting focus on the 20.6398 level above, a break of which would confirm a proper reversal is underway.