Breaking News

Gold And Silver: A Psychology-Driven Bear Market

By MetalMiner CommoditiesMay 27, 2014 05:10AM ET
Gold And Silver: A Psychology-Driven Bear Market
By MetalMiner   |  May 27, 2014 05:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Gold is the only commodity where physical annual demand is only a tiny fraction of total supply available and shortages of gold caused by physical demand never happen. For this reason, the price of gold is almost entirely dependent on psychology and the factors that drive psychology, such as inflation and the dollar. Despite all that, we still see analysts writing lengthy reports analyzing factors with zero predictability, such as jewelry usage and annual gold production.

The strong relationship between silver and gold makes it mandatory to study and understand both precious metals together. Despite recent attempts to go higher, both metals (and almost any commodity) remain in a falling market since 2011.

Gold Daily Chart
Gold Daily Chart

Gold and Silver prices since 2013

We already commented in February that the price increase in the beginning of the year were likely to fail. We recommend that buyers follow the trend and not worry about normal price fluctuations. We expect both precious metals to remain at low levels and we wouldn’t be surprised to see them recording new lows.

The performance of the US Dollar Index will give good clues on where these two metals will head through the rest of the year. The US dollar remains relatively stable and unless the dollar falls to new lows, we don’t expect silver and gold prices to mount a comeback.

What This Means For Metal Buyers

Silver and gold prices keep weakening, remaining in a falling market. The current picture tells us that we could see more of a downward slope. We believe that there is no need for buyers to take long-term positions. In a falling market, it makes sense to wait for bullish signals before making early decisions.

Gold And Silver: A Psychology-Driven Bear Market
Gold And Silver: A Psychology-Driven Bear Market

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post also to:
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email