Gold & Silver Market Analysis for Monday 19th of July

Kinesis Gold Analysis

In the last few days, the Brazilian Central bank announced that in June it bought over 40 tonnes of gold, the largest amount since December 2000, increasing its reserves by 50%, to a total of 121,2 tonnes. Central banks‘ interest in bullion, as well as private investors‘, remains remarkable.

Despite this, the gold price has started the new trading session in red. The mood is the same as in the final hours of last week, with bullion hit by the increasing pressure coming from the strength of the US Dollar, while the gold price is getting closer to the $1,800 mark. There is a good chance of seeing a new reaction of bullion, as buyers have shown to be active once the price is approaching the area of $1,790 – 1,800.

The price per gram is still holding above $58, as the below chart shows.

Central banks remain under the spotlight, as traders are now waiting for ECB decisions and especially for Christine Lagarde’s speech. It seems obvious that interest rates will remain unchanged once again. However, markets would try to understand something more from Ms Lagarde about the symmetrical inflation target of 2% of ECB, as well as the possibility (and the timing) of tapering from the ECB, whereby tapering means a progressive reduction of the liquidity present in the system.

Last week was dominated by Jerome Powell’s speech, which dismissed the idea of ​​early tapering from the Federal Reserve. Powell explained how the Fed will await „further substantial progress“ in the economy, helping gold recovery, which was curbed anyway on Friday by the persisting recovery of the US Dollar on the FX market.

Kinesis Silver Analysis

The sell-off seen on Friday has weakened the technical scenario for silver, as the price has lost the support zone of $26. The early trading of Monday is just a continuation of this movement, with silver extending losses by another 1.5%. The main reason for this decline can be found in the strength of the greenback and the consequent weakness of the whole precious metal sector.

For a quick come-back, it will be crucial seeing prices trying to recover the $26 mark, while the next resistance is placed at $26.5/26.6.

We should point out in any case that the recent correction for long term investors could generate interesting investment opportunities. Indeed, any spike in inflation or any new rush on commodity price, would definitely also involve silver price, which is still traded almost 50% below its historical highest.

Carlo Alberto De Casa is Market Analyst for Kinesis. 

He also writes as a technical analyst for the Italian newspaper La Stampa.

Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018. 

This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.