Gold traded higher on Friday but ended the week modestly lower. Given the risk-on sentiment this week – evidenced by the strength in the stock market – the yellow metal was pretty darn resilient.

The signing of the Phase One trade deal between the U.S. and China seemed to be the driving force behind risk appetite, despite its limited scope. Better than expected Chinese economic data further bolstered global sentiment and soft U.S. inflation fostered a belief that the Fed won't be hiking rates any time soon.

The market readily dismissed this week's movement on the impeachment front. Whether witnesses are called in the Senate or not, it is widely believed that President Trump will be acquitted and remain in office.

In the wake of gold's big sell-off on January 8th, which resulted in a key reversal, the downside follow-through this week was pretty limited. While the yellow metal remains below the 9-day SMA, the 20-day (1536.40) was left unmolested.

Spot Gold Daily Chart

Spot Gold Daily Chart

Gold may still dip to test the 20-day, but I think the underlying trend remains favorable. I'd feel better about that assertion with a rebound above 1573.67 (50% retrace of the recent decline). At that point, I'd be looking for a retest of the recently established near-7-year high at 1611.41.

On the other hand, a close below that 20-day SMA would leave gold vulnerable back to the 1500 zone, where I think the buyers will reemerge.

The silver trading pattern was very similar. The white metal closed right at the $18 level, holding above the 20-day SMA on a close basis. The halfway back point of the recent decline comes in at 18.27, which is now protected by Friday's high at 18.17.

Spot Silver Daily Chart