Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Gold Could Crack $2,150 In August; Silver Eyes $30

By Investing.com (Barani Krishnan/Investing.com)CommoditiesAug 05, 2020 04:35AM ET
www.investing.com/analysis/gold-could-crack-2150-in-august-silver-eyes-30-200533037
Gold Could Crack $2,150 In August; Silver Eyes $30
By Investing.com (Barani Krishnan/Investing.com)   |  Aug 05, 2020 04:35AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Where in the world is gold headed? With US gold futures setting one record high after another—the latest above $2,052 an ounce on Wednesday morning in Asia—everyone is trying to answer that question. 

And as simplistic as it sounds, the yellow metal’s rise or fall from here is almost entirely dependent on one thing: the dollar.

For, after all the insightful charts, and fancy candlestick and Fibonacci readings, gold’s value, like that of any commodity, is determined by supply and demand. 

And for precious metals, which are invariably in limited supply compared to other raw materials, an additional layer applies: the supply of money, which determines the value of currencies like the dollar.

The US Dollar Index, which ties the value of the greenback to six other currencies, was at 17-year highs of 103.960 in March. The dollar stood rock solid then as equities crashed at the height of coronavirus fears, creating a chronic need for cash to cover margins in stocks that, in turn, led to run on gold—the best asset one could liquify under pressure to raise money. Gold, consequently, fell to a 4-month low of $1,451.00.

Blame It On Plunging Yields, Real Rates And The Dollar 

Fast forward to August: The Dollar Index is now at 27-month lows of 93.047, battered by plunging US 10-year yields and real rates into deeper negative territory, as well as the issuance of more than $3 trillion in US coronavirus relief funds since March, and counting. 

One need not be a Harvard economist to understand the inflationary impact of all that money supply on the dollar down the road, investor fears about the health of US balance of payments and why everyone’s looking at gold to hedge away at least some, if not all, those concerns.

At the time of writing, the October gold contract on New York’s COMEX had set a record high of $2,038.95 by early Wednesday afternoon in Singapore, after settling Tuesday’s regular trade in New York at $2,001.20, with a session peak at $2,014.15.

Gold Futures Daily
Gold Futures Daily

Even more scintillating was the performance of COMEX’s December gold contract, which has attracted higher volume and open interest than front-month October. December gold reached a record high of $2,055.40 on Wednesday morning in Singapore.

Spot gold, which reflects metal available for immediate delivery, meanwhile, hit a record high of $2,039.90 Wednesday morning.

Gold At $2,150 Looks Achievable Next

Given the continued tumble of the dollar and gold’s virtual ascendancy to $2,050 an ounce, I’m inclined to think that $2,150 would be an achievable near-term target on the COMEX, possibly before the end of this month. In line with the market’s focus and activity, this will likely happen on the December contract before it does with front-month October or spot gold.

XAU/USD Daily Chart
XAU/USD Daily Chart

I’m not alone in making this call.

AG Thorson, an expert in the study of gold’s technicals, said a continued breakdown below 92 on the Dollar Index could trigger what he called a “waterfall decline.”

“In this scenario, gold would likely extend above $2,100 and enter a parabolic rise,” Thorson wrote in a blog posted Wednesday on FX Empire.

Sunil Kumar Dixit, an independent analyst in precious metals, said gold was displaying a “measured Fibonacci move” of the previous record high year of 2011 where it went to $1,920 versus the low of 2015, when it hit $1,046.

He added that this showed a 123.6% retracement level—which was rare—and marked the metal’s next ascendancy to $2,127, “though buoyancy is likely to match $2,150 as a strong case.”

Thorson said in the past, a dip below 20 in the daily Relative Strength Indicator of gold characterized an interim cycle low. 

With the RSI reading reaching 18.61 on July 30, “the odds for a potential bottom in the dollar and temporary spike high in gold are significant within the next several days,” he wrote.

But in the same breath, he had a word of caution for gold bulls, that the market was getting increasingly heavy at the top. “I see the potential for increased volatility this week,” he said.

Not A Time To Short Gold, Say Analysts

Yet, Christopher Lewis, another analyst who blogs at FX Empire, expects gold bears to be defeated at most points of the market’s current momentum.

“It is not until we break down below the $1,800 level that I would consider shorting this market, or if perhaps the Federal Reserve started changing its overall attitude,” Lewis wrote.

“I do not see that happening anytime soon, so it is very likely that we will continue to see plenty of buying opportunities and I am simply going to be patient enough to take advantage of them as they occur. Until something changes, shorting is not even a thought.”

Eli Tesfaye, precious metals strategist at RJO Futures in Chicago, said he expects the Dollar Index to crumble below 90 in the coming months, priming gold for highs way above current levels.

“We’re going to have a lot of latecomers come into gold and they’re going to try and push the market higher,” Tesfaye said, concurring with Lewis.

“A lot of trend following systems will come in. Lots of stops are going to be pulled and shorts squeezed.” 

Silver Target Seen At $30

Tesfaye also projected that silver, which hit a one-week high of $26.87 Wednesday morning for the front-month September contract on COMEX, could steady at around $30 by the year-end.

Silver Futures 5 Min Chart
Silver Futures 5 Min Chart

Tesfaye said:

“I think silver is still very cheap relative to gold, and you’re very, very likely to see $30 silver in the next few months."

He also pointed to another interesting evolution with the silver market: The dwindling discount between the front-month September and nearby October contracts, which indicated a potential return to “backwardation” from the current “contango” situation. In commodities, a backward-dated market, where the current month was at a premium, was a signal of strength. At Tuesday’s settlement, September was at a discount of just 6.3 cents to October, versus the more than 18 cents difference on Monday.

Dixit, the independent precious metals, also has $30 silver in his view.

Dixit wrote:

“Silver is resisting 38.2% Fibonacci retracement on long time frame ranging from the 2011 record high of $49.79 to the 2020 low of $11.62 which sits at $26.18."

He said silver has confirmed a breakout above the “pennant formation in short time frame” that targets $30.11.

Dixit added:

“This also coincides with the Fibonacci 50% retracement at $30.20 and this is a high probability scenario."

Gold Could Crack $2,150 In August; Silver Eyes $30
 

Related Articles

Gold Could Crack $2,150 In August; Silver Eyes $30

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.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
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.
Comments (20)
Howard Legg
Howard Legg Aug 09, 2020 7:46AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The wourld is a wonderful place everything is gold plated. Tank you for the advice.
Musical Critic
Musical Critic Aug 07, 2020 8:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
$3000 by year end. Definite. No second thoughts. Repeated this many times here since $1700. Will bet anything on it.
Tobi aderibigbe
Tobi aderibigbe Aug 07, 2020 8:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hello
Tobi aderibigbe
Tobi aderibigbe Aug 07, 2020 8:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
U can't transfer send money for $2000
Manish Fichadiya
Manish Fichadiya Aug 07, 2020 1:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
sir your tgt hits $30
Indiana Jones
Indiana Jones Aug 06, 2020 11:26PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think we should focus on the silver market fundamentals. You might try checking out Kitco’s website. These are real metals people, and they’re saying that silver is up due to speculation, not real demand. Lots of weak longs out there, so when the price drops, it’s gonna be hard and fast.
brian begi
brian begi Aug 06, 2020 4:26AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
great article Barani
Ravindran Chelvam
Ravindran Chelvam Aug 05, 2020 10:41PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the well written article Barani. what is your view on the cup formation on monthly chart? i think we are due for a decent pullback to complete the handle.
Josefina Machado
Josefina Machado Aug 05, 2020 3:59PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very interesting news...Thank Mr. Barani¡¡
Matheus Martinelli
Matheus Martinelli Aug 05, 2020 1:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tanks!
CAP Po
CAP Po Aug 05, 2020 10:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think gold is going to be able to hold 2000 as support for a while, but I expect a pull back in the coming days before heading higher. Great Analysis.
Banu Banu
Banu Banu Aug 05, 2020 9:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks for your information
Barani Krishnan
Barani Krishnan Aug 05, 2020 9:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the feedback.
Jan Buyle
Jan Buyle Aug 05, 2020 9:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
not could.... will!
Barani Krishnan
Barani Krishnan Aug 05, 2020 9:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, Jan. But I always try to hedge my articles by saying "could". Fortunately, it's worked so far :)
emad hijazi
emad hijazi Aug 05, 2020 9:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank You
Barani Krishnan
Barani Krishnan Aug 05, 2020 9:29AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You're welcome, Emad.
Carlos Munoz
Carlos Munoz Aug 05, 2020 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I agree with the analyst “not the time to short gold”, because US gov stimulus is helping to raise prices of precious metals while dollar value gets cheaper.
Barani Krishnan
Barani Krishnan Aug 05, 2020 9:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, Carlos. It will be like standing in front of a freight train.
Raimondas Vaitkevicius
Raimondas Vaitkevicius Aug 05, 2020 9:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
if you hear everyone talking about gold its time to take profits
Barani Krishnan
Barani Krishnan Aug 05, 2020 9:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Raimondas, yes, but intraday profit-taking will be good. I hear a lot of people are doing that. I'm only a writer, so what do I know :)
Indiana Jones
Indiana Jones Aug 05, 2020 9:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan Not enough people are taking profits, or the price wouldn’t be going parabolic. Also, it used to be that the miners (even the etf, SIL) were higher beta than SLV. Look at AG’s Q2 results released this afternoon. Costs were WAY up, and production down. These miners are not as levered operationally as many think.
Vikash Jain
Vikash Jain Aug 05, 2020 8:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
great sir
Barani Krishnan
Barani Krishnan Aug 05, 2020 8:50AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks, Vikash jee.
Kristof Naessens
Kristof Naessens Aug 05, 2020 8:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
We might start seeing the beginning of the shorts covering, for silver that will be a big problem! Expect a lot of volatility ahead.
Barani Krishnan
Barani Krishnan Aug 05, 2020 8:48AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
True, Kristof.
Alex Malmstrom
BrassTacks1 Aug 05, 2020 5:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The $2150.00 level is also the 2.618 Fibonacci extension measured from the December 2015 low at $1045.40 to the July 2016 high at $1377.50, using log scale for both the price chart and Fibonacci extension. Interestingly, the rally from December 2015 to July 2016 was +31.77% and the rally from December 2019 to July 2020 was +37.37%.  A 5-month corrective phase followed from August to December 2016 and prices dropped by -18.19%. If the exact same time and price pattern would occur at the end of August 2020, then a -18% drop would see prices close at around $1760 in December if they reach $2150 prior to that. Great article again, thanks.
Barani Krishnan
Barani Krishnan Aug 05, 2020 5:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
BrassTacks1, thanks again for your incisive views. Much appreciate your thoughts as well as feedback.
Gordan Flego
Gordan Flego Aug 05, 2020 4:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold is headed to 2600-2700. Look at monthly from when gold was 300. After previous peak retracement was 50%. Measured objective of this retracement is 2600.
Raimondas Vaitkevicius
Raimondas Vaitkevicius Aug 05, 2020 4:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
better look for exit point it.is to much euforic
Barani Krishnan
Barani Krishnan Aug 05, 2020 4:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gordan, yes. Raimondas, no (this market has more to go)
Indiana Jones
Indiana Jones Aug 05, 2020 4:57AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan Agree, but I’m seeing gold being a better investment than silver because, unlike silver, there’s no industrial use for it. Thus gold is not as tied to an economic recovery, and how low will the dollar really go when every country is going to neg real interest rates.
Ahammed Saleem
Ahammed Saleem Aug 05, 2020 4:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Very interesting review sir
Barani Krishnan
Barani Krishnan Aug 05, 2020 4:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the feedback, Ahammed.
Peter BullMarket
Peter BullMarket Aug 05, 2020 4:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold can crack $2100 this week still
vaishnavi kannan
vaishnavi kannan Aug 05, 2020 4:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thats positive. I placed a buy position now
Barani Krishnan
Barani Krishnan Aug 05, 2020 4:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks, Pedro and Vaishnavi :)
Indiana Jones
Indiana Jones Aug 05, 2020 4:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
vaishnavi kannan Be careful, lots of weak longs out there.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
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
or
Sign up with Email