Demand for precious metals increases

During the past days Gold’s and Silver’s price have seen an increase in value partially reversing the selloff performed last week. It could be a possibility that the ongoing weakening of the USD could be very alarming to investors as they seem to turn their attention to other options like precious metals and stocks. Especially in a time when uncertainty is running high, metals like Gold and Silver seem to be favourable choices for hedging purposes or even strong volatility. Also Warren Buffett’s Berkshire Hathaway buying a stake in a major gold miner recently may have intrigued other traders and investors to trade gold. Among other metals, Copper also moved higher on Wednesday, as it rose to a more than two-year high. Please note other instruments like GBP/USD moved to a 2019 high while the EUR/USD moved to a 2018 high level, supported by a weaker U.S. dollar. Traders should have in mind the upcoming FOMC meeting Minutes to be released today in the US session, as any important information by the FED may prove an opportunity. Caution is advised as the event could create substantial volatility for the markets.

XAG/USD had moved higher to test the (R1) 28.50 level but failed to break above it. Thus in the latest 4 hour sessions, Silver has moved lower towards the (S1) 27.35 level but has not breached it yet. In a bullish scenario the levels we have noted above the (R1) are the (R2) 29.20 last seen on the 11th of August while even higher we have also noted the (R3) 29.85 level, briefly reached on the 7th of August and is a multiyear high since 2013. In case the precious metal moves lower below our (S1), next could be a stop at the (S2) 26.75 line last seen on the 17th of August and even lower the (S3) 26.00 hurdle that was tested on the 17th and the 14th. A breach below the (S2) would change our current bullish view to a sideways motion. A move below our (S3) line would change our view to bearish.

Nasdaq and the S&P500 move higher

Similar to Monday’s session, on Tuesday both the Nasdaq and S&P500 continued their move higher while the Dow Jones30 was marginally lower. Some, market participants see the steep rise in the US stock markets as the fastest recovery movement formed from a crisis. Yet, the fact that economic circumstances remain constrained as the economy continues to struggle with high unemployment, counterbalances the news. The biggest upward mover for the S&P500 was Amazon.com Inc. that gained +4.09% on the session and closed at $3312.49. Supporting Amazon’s stock price was the announcement that it is planning to create 3,500 jobs across six major U.S. cities. It was also said that Amazon intends to invest $1.4 billion for this plan. Currently and with its latest move higher the US500Cash index has reached our (R1) 3390 resistance level. This level is important as it was last seen in February 2020 and it indicates that the index has now recovered to pre pandemic levels. If the upward momentum is to continue the index could make a stop at our (R2) 3450 line and even higher the (R3) 3500 hurdle. In the opposite direction, a move lower could send the index back to the (S1) 3325 line last seen on the 11th of August. This level was tested various times in the past weeks, proving to be a strong level. Lower we have also noted the (S2) 3275 level and even lower the (S3) 3215 hurdle that has also proven to be solid from its activity in July. The RSI indicator below the chart is currently just below the 70 line possibly implying the bullish demand is still in play.

Other economic highlights today and early tomorrow

Today during the European session, we get the Eurozone inflation data for July. In the American session we get from Canada the inflation data and the weekly US EIA crude Oil stock figure. Finally, in the late American session we get the FOMC meeting minutes.

XAG/USD 4 Hour Chart