The precious metals complex (gold, silver, platinum and palladium) was traded under pressure, with all precious metals futures contracts closing sharply on the day. Silver futures suffered the biggest reduction, with the most active March contract losing $ 2.70, down 9.17%, and is currently set at $ 26.71. This action followed the Chicago Mercantile Exchange (CME) decision to increase the margin requirements needed to negotiate a single Comex silver contract by 18%. The old margin requirement of 14,000 by 5,000 ounces per Comex contract for $ 16,500.
Given the extreme volatility that has caused precious metals to trade dramatically higher in the past three trading sessions, the move by CME Group to increase margin requirements for silver futures is a normal response to increased volatility. It is the exchange that guarantees the performance of any operation carried out. The exchange guarantees that the winners will be paid and facilitates this by debiting the accounts of the merchants who incur losses.
The dramatic decline in silver came after a three-day high in silver futures drove prices from a low of $ 24.92 on Thursday, January 28, to a high yesterday above $ 30 per ounce, with a settlement price above $ 29 per ounce yesterday.
Silvers decreased resulting in significant damage to the technical chart?
Based on our technical studies, silver did not cause any major graphic damage. Although the current 9% decline has been severe, silver remains above the top three moving averages; the moving averages for 50, 100 and 200 days. It also remains above the 23% long-term Fibonacci retraction. The data used for this Fibonacci retracement is a long-term study that begins in mid-March 2020, when silver prices were trading below $ 12 an ounce, until the highs of August 2020, when the silver flirted to no avail at $ 30 an ounce. That same level of strong resistance that was evident at $ 30 in August last year remains a technical point of great resistance. The golden cross identified on January 21 between the 50- and 100-day silver moving average remains intact.
Simultaneously, the price gap or vacuum that was created from the closing on Friday of last week. The dramatically higher price that occurred when markets resumed trading in Australia on Monday morning has been filled. Most market technicians believe that price gaps or gaps are highly likely to be filled. When these gaps occur during an increase, it is not uncommon to see prices fall to fill the gap.
Gold closes below its 200-day moving average.
However, on a technical basis, gold suffered damage to the tables today as it fell 1.36% or $ 25.40, with the most active Comex contract in April 2021 currently set at $ 1838.50. This puts current prices below all three major moving averages (50,100 and 200 days). Today’s decline also took the current price just below the 38.2% Fibonacci retracement, which runs at $ 1843.30. The timeline for the data set used for Fibonacci retracing is the same as the one used for silver. It all started when gold traded at a low of $ 1443 in mid-March last year, up to the all-time new record set in August 2020, when gold reached $ 2,088 per ounce.
Although, in technical terms, gold prices have suffered a major blow, the fundamentals for price support are still extremely strong. The Federal Reserve maintains an extremely accommodative monetary policy, including interest rates close to zero and quantitative easing. When combined with fiscal spending of $ 4 trillion last year and President Biden’s current proposal to start another round of stimulus, which will add $ 1.9 trillion to the national debt, strong fundamental support for metals can be defended. precious complex including gold and silver prices.
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