After a volatile start to the week, gold has made strong gains the past two days, breaking through the $1,800/£1,300 per ounce barrier that has proven a resistance point for prices in recent weeks. Silver also enjoyed strong gains, up 4.56% in the past week.

After trading in a tight range for much of the past 3 weeks, gold had been bumping against $1,800 for some time, but a slight weakening of the Dollar, a host of commodity prices rising, and ongoing inflation fears yesterday managed to push the metal up to its highest in almost three months.

070521 USD Chart
The strength of the rally was impressive, with gold pushing all the way to $1,820 per ounce in trading this morning. When key resistance points are broken the price often rallies strongly as momentum builds, and brings in further buyers.

The rally was further boosted this afternoon with the release of US job data that came in far below expectations. The US added 266,000 jobs in April versus Wall Street hopes of around 1 million. With March’s figures also revised down, and unemployment actually rising, the US economic recovery looks to be less strong than thought the past few weeks.

Gold quickly climbed to $1,843.64/£1,320.52 per ounce as the news broke, adding another step to yesterday’s rally. It has pulled back slightly to $1,832 per ounce as investors digest the surprise results but leaves gold still up 3.33% so far this week and brings it closer to the three-month high.

Silver’s rally had initially outperformed gold, enjoying the same benefits of investment demand as gold, as well as a boost from expected industrial demand as economies opened up. The US job figures initially gave it a similar boost to gold, soaring to $27.68/£19.85 per ounce. With US manufacturing jobs falling by 18,000 in April however it seems to have hampered silver’s rally, which has come back down to $27.27/£19.53 at the time of writing though there still seems to be volatility as traders continue to process the numbers.

The job figures could help calm any fears that central banks will be tapering bond purchases or raising interest rates in the near future, as the economic recovery looks to be further from the end than previously believed. With a number of key commodities including iron, copper, and lumber all experiencing significant price rises however, it remains to be seen if inflation will be a short bounce back following last year’s deflationary pressure, or a more sustained problem.

This week has been a good reminder that the road to recovery following such an unprecedent global event as Covid-19 will not be a smooth one. Uncertainty remains in many aspects of life, and there will likely be further unexpected events to come, and debates over how to combat the financial impact they have.