Will the Downward Trend in Gold and Silver Continue?
The gold market is going through some unusual changes right now. Although there is a surging demand from regions such as India, the overall gold price is crashing hard. In fact, its value dropped by 6% on Thursday and Friday, which is quite surprising. It appears that investors deem precious metals too”risky” to invest in right now. – JP Buntinx
It has not been a good week for gold bugs all over the world. Prices have dropped by as much as 6% this week, settling at a low of nearly US$1,220 per ounce. Experts seem to look at Trump’s election victory as the reason for this drop, although it looks like other factors are at play as well.
It was to be expected that investment markets would respond strongly to the US Presidential election outcome. Such a steep downtrend wasn’t planned for gold, though, as the changes took virtually everyone by surprise. Additionally, it is not the first time that gold closes the week a lot lower than it began, even though the gap is a lot bigger this time around.
The bigger question is whether or not this downward trend will continue for gold and precious metals. The Federal Reserve is expected to unveil their plans for the interest rates in December. Depending on the information they will share with the public, the next trend will be either shooting upwards, or plummeting further in the coming months.
One thing is certain, and that is gold is under a lot of pressure. With asset prices on the rise and expectations for increased interest rates, investing in gold is a far less favorable option all of a sudden. In turn, this will affect the price per ounce, as investors may start to pull funds out of their gold savings and put it back into savings accounts.
Despite this temporary setback, the long-term outlook is still looking positive for gold and silver. Financial turmoil is always a driving factor for additional bullion investments. Keeping in mind how the Brexit still has to play out, it is possible that the gold price will surge again before the end of the year.
Investing, whether it is in stocks, bonds, bullion, or even Bitcoin, is always a long-term game. Granted, some people are in the business to scalp profits whenever they can. But for people who want financial stability, such an investment should be looked at quarterly, or even semi-annually.
Silver Prices Weekly Forecast
Silver prices tumbled on Friday, not only erasing earlier gains from the week but wiping out gains from the prior three weeks. Ahead of the US election, there was a strong bid for precious metals as investors were seen primarily hedging exposure in the financial markets through metals. Silver prices showed some resiliency by holding near weekly highs after the election despite Gold prices promptly turning lower but inevitably dropped lower for a single day decline of 6.81% on Friday.
Friday’s decline has resulted in a notable technical break as a rising trendline as well as the 200-period daily moving average were breached to the downside. The rising trendline connects January lows with late March lows and had held prices higher throughout October. The drop below the 200 DMA has been the first time Silver has traded below the indicator since March.
The US Dollar index (DXY) posted net gains on the week despite declining sharply as election results initially started to come in. DXY reached a low of 95.89 referencing one-month lows but reversed sharply to close the day out higher. While upside momentum slowed in the second half of the week, the index closed five consecutive days in the green and has erased losses from the prior two weeks.
In the upcoming week, the latest inflation data will be released out of the United States and stands to impact Silver prices. The consumer price index will be reported on Friday and is expected to rise 0.4% in October, up from a rise of 0.3% in the prior month. The core CPI is expected to rise 0.2% against a rise of 0.1% in the prior reading. On Tuesday, the latest retail sales figures will be released out of the United States and also stand to cause volatility. Janet Yellen is scheduled to testify in front of the joint economic committee on Friday, her speech will shed some light on the Fed’s outlook following the election.
The technical break in Silver prices combined with the weekly bearish engulfing candle will set a bearish tone for the upcoming week. Recoveries towards the 200-period daily moving average carry some potential to trigger a continuation lower. Further horizontal resistance is seen at $17.81 reflecting daily highs from the start of May. The first level of support is seen at $17.19 and has already triggered a small bounce on Friday. Further support is seen at $16.65 with the 61.8% Fibonacci retracement measured from December highs to July highs in close vicinity, falling at $16.48 to create a confluence of support.
XAG/USD Daily Chart
– Jignesh Davda
Gold to Silver Ratio Highlights Disastrous Week for Precious Metals
Post-election anxiety quickly turned into optimism this week, leading precious metals to one of their worst performances in recent memory. – Sam Bourgi
Gold prices logged their biggest weekly decline in three years, including a more than $40 drop on Friday. The November contract settled at $1,223.50 a troy ounce Friday, its lowest close since before the Brexit vote. For the week, gold prices plunged more than 6%.
Silver was on track for a solid weekly gain before running into volatility on Friday. The grey metal plunged more than 7% on Friday to settle at its lowest level in over a month.
The gold to silver ratio used by investors to determine when to buy and sell precious metals closed at 70.46 Friday after falling toward 67.5 earlier in the week. Gold’s premium over silver has declined 1.8% over the past 30 days.
A stronger dollar also weighed on precious metals this week, as investors continued to price in a US rate hike next month. The greenback surged to nine-month highs against a basket of other major currencies.
On Friday, Federal Reserve Vice Chair Stanley Fischer added to the view that interest rates are rising soon. Fischer said that the case for raising rates had strengthened on account of improving unemployment and inflation.
Traders are pricing in a more than 81% chance of a December rate increase, according to the 30-day Fed Fund futures prices.
Donald Trump became the 45th President of the United States Tuesday, as the GOP candidate swept the battleground states on route to an easy majority in the electoral college. As of Saturday, Trump had secured 290 electoral college vote. A total of 270 electoral college votes are needed to secure the presidency. Results from two states are still pending.
Trump’s victory sent copper prices soaring on belief that the new president will follow through on his promise to rebuild America’s infrastructure. Copper spiked more than $1,000 since Monday for its best weekly performance since 1979.
As a byproduct of base metal extraction, silver is tipped to rise on account of increased infrastructure spending. According to analysts, a combination of technical and fundamental factors make silver a sound long-term investment.
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