Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Gold And Silver Prices Move Sideways

Published 11/01/2013, 07:31 AM
Updated 05/14/2017, 06:45 AM

The event of the week was the FOMC meeting on Wednesday, which actually said nothing of any substance. This was hardly surprising, given the impending change of chairmanship; however it triggered a rally in the US dollar as dollar bears rushed to close, and gold fell $20 from $1355 to $1335 in less than half an hour.

The price continued to drift lower yesterday, closing at $1323. The consensus now appears to expect tapering following the March FOMC meeting. However, for that to happen, the economy will have to recover, unemployment will have to fall and the Fed will have to revise its forward guidance on interest rates. Therefore, those that expect tapering must be reflecting optimism about economic prospects.

For the moment, gold appears to be capped at $1360, having failed to break through that level three times this week. However, gold has had a good run of $90 from $1252, so some consolidation makes sense. Silver must overcome supply at $23.10. Once these levels are broken there will be a good chance of a bear squeeze, forcing the shorts to close, and the bulls on the side-lines will worry about missing the rise.
Charts of the daily close for gold and silver are shown below.

There was little in the way of solid news this week, with gold being on the other side of the dollar trade: when high frequency traders and hedge funds see the dollar rallying, they sell gold, and vice-versa. The problem with this sort of trading is that it is essentially mechanistic, losing sight of deeper considerations of relative value. This is why new factors, even though they may not be very significant in themselves, can have a disproportionate effect on prices. It also explains why traders in the paper markets can ignore fundamental developments, such as the overwhelming demand for physical gold from China and Asia generally, for extended periods of time.

Besides the independent direction of paper gold and silver markets relative to bullion demand, loose thinking over the tapering issue needs to be resolved. Expect commentators in the coming weeks to address the inconsistency between expectations over tapering and the Fed's longer-term commitments to low interest rates. This has to be put in the context of the economic outlook, which for the Fed's FOMC is still far from clear.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.