Gold: Weakens as Risk Appetite Strengthens

Following five consecutive weeks of rallying, Gold prices slipped lower this week despite further USD weakness. Deteriorating impact from the Fed's hiking cycle has seen the US Dollar losing value over the first few trading weeks of the New Year, allowing gold to gain a stronger footing and recover nearly all of the losses suffered during the decline from last year's highs. The rally in gold comes despite a strong improvement in global risk sentiment, as equities surge to fresh highs and geo-political tensions cool. Many investors had been using Bitcoin as an alternative to investing in gold but with the price of Bitcoin cratering over recent weeks, many investors have been turning back to the traditional safe haven asset which is a dynamic likely to keep gold supported.

The rally in gold has seen price traveling back up to just under the bearish trend line of the contracting triangle pattern that has framed price action over the last two years. If price breaks back above the bearish trend line, the next key level will be the 2016 high at 1376.20. To the downside, the next key support will be a test of the rising trend line of the contracting triangle pattern along with the key 1297.76 level which was key resistance over much of 2017.

Silver: Prices Weaken but Bullish Forecasts Remain

Silver prices were also softer this week, tracking the moves in Gold. Silver typically performs best during periods of growth due to its industrial uses. The synchronized uptick in global growth has seen demand kicking back in for silver, with HSBC forecasting much higher prices over 2018, highlighting weaker supply and likely stronger demand. Additionally, the bank stated that Fed rate hikes are already priced into the market and should have a limited affect on silver, though any Fed dovishness could prove to be an accelerant for higher prices.