Gold Rally Continues on Risk Aversion

It’s been a bumper start to the week for gold and silver with both metals enjoying firm demand across early European trading on Monday. Gold prices are trading at fresh highs for the year as the rally continues to log gains amidst on going market turmoil and investor uncertainty.  Gold prices are now up more than 11% off the March lows, eclipsing the previous YTD highs printed in February, taking silver prices higher also.

The current backdrop of financial stability fears in the banking sector is fuelling a wave of risk aversion across markets. With safe-havens gaining firmly form the current moves, demand looks set to remain in place while markets continue to trade with a risk off tone. As such, incoming news around the freshly announced UBS purchase of Credit Suisse will be closely monitored by traders. For now, news of the deal has not yet improved risk sentiment with equities and broader risk assets still under pressure.

Looking ahead this week there is also a lot of uncertainty around the March FOMC. Pricing is fairly evenly split between no hike and a .25% hike. However, there are some urging the Fed to push ahead with its planned tightening and on the back of the ECB hiking by .5% last week, hawkish risks remain.  However, if the bank does hike, this will likely exacerbate current market turmoil leading metals higher on increased safe-haven demand.

Technical Views

Gold

Gold prices continue to trade higher within the bull channel which has framed the move off last year’s lows. Price has recently broken above the 1973.51 level and while above here, the focus is on a further push higher in line with bullish momentum studies, targeting a test of the 2069.41 level above.


Silver

The rally in silver prices off the YTD lows has seen the market moving back above 20.6398 and 22.3105 more recently. While above this last level, and with momentum studies bullish, the focus is on a further push higher and a test of the 24.0073 level next.