In the last few articles, we talked about the various factors that created downward pressure on gold and silver prices. Of all these factors, there are two that seem to have the greatest impact in creating a negative market sentiment in relation to safe port assets, gold and silver. It is the strength of the dollar, a direct result of the increase in yields on United States Treasury bills and notes. From March 9th to 11th, the two metals established themselves as they gained value. After trading for an intraday low on Monday, March 8, at $ 1,672, the next three trading days would take the precious yellow metal up to an intraday high of $ 1,739. These gains observed over the course of three trading days were the result of the dollar’s weakness, which helped to reduce falling Treasury yields, as well as market participants actively buying the decline.
That is why current activity, in both gold and silver, is not reacting so severely to the strength of the dollar and today’s rising yields. It is a pivot of 180 ° in relation to the reaction and, in some cases, an exaggerated reaction seen recently with the appreciation of the dollar, leading to a drop in the prices of ten-year notes sold for less and returning a higher yield.
As of 2:47 pm EST, gold futures are based on the most active Comex contract in April 2021, essentially unchanged. Gold futures are currently set at $ 1723, after taking into account the $ 0.50 gain, which is a 0.03% advance. At the same time, the US dollar index rose just over ¼ one percent and is currently set at 91.66. This means that the dollar creates headwinds that have been overcome by market participants who actively buy the precious metal.
This can be clearly illustrated when we look at the price of spot or physical gold through the eyes of the KGX (Kitco Gold Index). According to the index, spot gold is currently set at $ 1,725, after taking into account the $ 1.90 gain. On closer inspection, we can see that market participants offer higher spot gold prices at $ 6.70 (+ 39%); however, in the case of spot silver or forex, it lost $ 0.19 in trading. Today’s price drop had the same catalyst that drove it, a combination of dollar strength that contributed seven cents to today’s drop, with the remaining $ 0.12 drop directly attributable to the market participants who bid for that metal. lower precious.
As reported on MarketWatch, Ross Norman, executive director of the metals daily, said: “It’s all about the yields of the US Treasury again, with a firm dollar aggravating the gold problem.” He also moderated his bearish sentiment when he said: “Encouragingly, physical demand in Europe is fantastically good with supply chains challenged and there is much of the same in China, where gold is now being traded at a premium of $ 10 an ounce on London prices. the demand for exchange-traded funds is comparatively weak. “
With everything equal, gold managed to end the week with fractional gains. April gold futures gained approximately 1.3% in this week’s trades, with silver gaining approximately 2.5%. For the past three consecutive weeks, gold and silver prices have closed below their opening price earlier in the week.
The biggest obstacle currently controlling gold and silver is the continued increase in Treasury yields. Currently, the ten-year note is traded at approximately 1.62%, just a few ticks from its recent price of 1.624%.
The downward sentiment in the market that has been so pronounced recently with regard to gold and silver appears to be consolidating, which may indicate a short-term fund. The fact that the price of gold has remained above $ 1700, since $ 25 is traded above that price, is impressive, considering the difficult battle that the bullish sentiment in the market has escalated. One issue that is quite disconcerting is the timidity of gold in the face of an almost absent reaction to the approval of President Biden’s “American Rescue Act”, which he sanctioned yesterday.
On a technical basis, there are more downside than upside indicators. Possibly one of the most alarming technical indicators is that the three main moving averages used by market analysts to determine whether market sentiment in the short, long term and short term is bullish or neutral. In the case of all three moving averages, they are currently well above current prices, which is a strong indication that we are in a corrective period. Much less weight is the fact that this recent correction has brought gold and silver prices very close to its 61.8% Fibonacci retracement. The data set used to create the setback started in mid-March, when gold prices traded at a low of $ 1450 and then started a dynamic high that ended in August, resulting in the highest gold price in history $ 2,088.
On a technical basis, silver futures have not suffered the same kind of damage compared to their moving averages, with the most active contract in May 2021 currently trading above the 200 and 100 day moving averages. The 50-day moving average, currently set at $ 26.50, appears to be where the current resistance lies. The performance of silver, which is far superior to that of gold in terms of percentage gains, may well be due to the fact that this metal has an industrial component and demand, which has supported the price of silver, since the markets of US stocks continue to trade substantially higher.
For more information about our service, just use this link.
Wishing you, as always, good trade and good health,
Disclaimer: The opinions expressed in this article are the responsibility of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. It is not a request to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article are not responsible for losses and / or damages arising from the use of this publication.