Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

What's Driving Gold, Silver and What's Next?

Commodities / Gold & Silver 2020 Sep 03, 2020 - 06:02 PM GMT

By: The_Gold_Report

Commodities

Peter Krauth looks at the factors behind the movements in the gold and silver markets. Gold's retreated from a record high above $2,000, and silver's off its own seven-year highs near $30.

Is that cause for concern? I doubt it.

These have been dramatic surges to new levels, brought on by a combination of low interest rates, historic money-printing raising the specter of inflation, a softer U.S. dollar, and of course a global pandemic.

But that doesn't mean gold and silver have to continue higher in a straight line.

Instead, these gains have been so strong that a period of retracement and consolidation are not only expected, they're crucial to the continued health of this precious metals bull market.


There are several fundamental drivers that will help keep gold and silver pushing higher, which I'm going to detail for you below.

Then we'll look at these metals' prices from a technical perspective to gauge what to expect next over the near term.

Gold's Fundamental Drivers

Mining gold has never been more expensive. It's possible that costs will drop for 2020 as demand for oil has retreated, but all kinds of related goods and services that go into gold production have gone up with pandemic surcharges.

Via the Wall Street Journal:

A higher cost of production will push gold prices higher. The metal is not likely to ever be produced at a loss and, if it is, it won't be for very long.

Gold exploration budgets continue to shrink on a global basis, as gold miners suffer from recency bias. They need to see gold at its current high price for an extended period before committing more funds to find more gold.

That also pressures junior gold explorers. They've only started to enjoy a more buoyant market to raise money in the past year as gold prices have come back to life.

S&P Global Market Intelligence recently reported the industry has suffered a decade of underperformance for gold discoveries.

Major gold mines are being depleted, and there is a dearth of new discoveries being made to replace mined ounces. Those being found are lower in grade, meaning more effort is required to extract an ounce of gold.

This is all pushing explorers and miners into increasingly risky jurisdictions, which ultimately is likely to translate into higher costs as well.

While these factors all point to higher long-term precious metals prices, we still need to understand their recent action to gauge what to expect in the shorter term.

Precious Metals' Technical Picture

We can see from the gold price chart that the correction which started in August after gold peaked near $2,070 is not likely over.

Gold's RSI and MACD momentum indicators confirm the current downward trend. Initial support is likely to be around the 50-day moving average near $1,875. After that we're looking at the $1,800-$1,825 level, which is where the overhead resistance in early July meets with the rising support (green) line.

Meanwhile, GDX as a proxy for gold stocks shows a similar correction, with its RSI and MACD both confirming the ongoing correction.

For GDX, initial support is likely around the 50-day moving average near $39, then $37 which was support in mid-July and overhead resistance in mid-May.

As well, the Gold Miners Bullish Percent Index remains at an elevated level.

This indicator typically needs to get below 30, then turn upward to get a bullish signal for gold stocks. That's clearly a ways lower from the current level of 75. It suggests we need to see a considerable drop in sentiment for gold stocks before we see a Buy signal.

The technical picture for silver is similar to gold's.

Silver's downside targets are previous resistance at $24.50, $23, then $20.

Comparing the performance of silver stocks versus silver, using SIL and SLV, reveals some interesting insight.

In early August, when silver peaked, the silver stocks only moved marginally higher. That was a strong indication that silver was likely putting in a near-term peak.

Silver stocks, like gold stocks, are in a correction phase.

If SIL breaks down below $45, first support is likely to be at the 50-day moving average of $42.75, followed by $40 then $37.5.

In my view, near-term action for precious metals is likely to remain weighed down. I also think we could see some strength in the U.S. dollar.

The U.S. Dollar Index trended further downward from late July. Yet that's when the RSI and MACD started showing positive divergence they've been trending upwards since.

Meanwhile, the "smart money" Commercial Hedgers appear to be betting the U.S. dollar has little downside, and probably some reasonable upside ahead.

Source: sentimentrader.com

To recap, the longer-term view for precious metals remains bright. The lack of sizeable gold discoveries, coupled with rising costs and lower grades bodes for much higher prices.

But the near-term technical picture continues to point to lower prices or, at best, a consolidation near current levels.

I still see gold reaching for $2,200 this year and silver to edge towards $34.

Stay tuned as I continue to track technical and fundamental developments for what to expect in precious metals.

Peter Krauth

Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market, with special expertise in energy, metals and mining stocks. He has been editor of a widely circulated resource newsletter, and contributed numerous articles to Kitco.com, BNN Bloomberg and the Financial Post. Krauth holds a Master of Business Administration from McGill University and is headquartered in resource-rich Canada.

Disclosure: 1) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. 2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules