Gold still pressing support, Silver breaking down

At Tricio we focus on economic cycles, market structures and investor behaviour in order to help clients navigate markets with a medium to long-term investment outlook.

In a blog in March we discussed downside risk in gold and silver prices. A few months later, with the US war in Iran heating up again, gold and silver prices are still correcting lower. Those who believe that these assets are ‘flight to safety’ commodities will be finding the pullback to lower prices attractive. On the other hand, gold and silver ‘bugs’ who bought into the precious metals on the view that inflation was high but the Fed was set to lower rates in 2024 may be thinking that the big rate cuts are in the rear view mirror. With inflation readings likely to remain above target over the next year then the next move by the Fed may be to raise rates, not cut them.

The chart below (weekly with 13 and 50-week moving averages) shows that gold prices are below both moving averages. At some point the 13-week moving average may cross below the 50-week moving average, giving a bigger bear signal when it does. The slightly rising support line comes in near $3,950/oz. now. If broken then targets to $2,600/oz. and $2,200/oz. would attract on simple swing measures. There is a long-term former resistance line near $2,170/oz. which would be expected to offer support at this area, just above the psychologically important $2,000/oz. area. Get ready for gold to lose half of it’s value?

Watch upswings just now as the 50 and 13-week moving averages should be difficult to regain if this is a bear slide set to extend. This makes the $4,320/oz. to $4,365/oz. area important as sustained breaks above these would open up $4,900/oz. risk for $5,600/oz. probes (and higher) if seen.

The weekly silver chart below shows that the break lower is accelerating. The focus is on $50/oz. (horizontal line) as a sustained break below this would leave $30/oz. and lower at risk. Watch the $63/oz. area ahead of the 50-week moving average ($64.80/oz. area) as resistance to hold. A turn above these would leave $75/oz. to $90/oz. open again ahead of the all-time high near $121.60/oz. While a renewed upswing is possible, the chart risk is seen as still being on losses at this part of the cycle.

For further information on our research insights and our ‘Ask a Buddy’ CIO service please contact us at info@tricio-advisors.com 

Gerry Celaya,

Chief Strategist