Gold & Silver Market Analysis for Friday 12th November

Kinesis Money Macroeconomic Analysis

The common trend often sees the price of gold negatively correlated with the price of the US Dollar. Although, the charts produced recently have shown a different story, as significant gains were posted for both gold and the US Dollar. 

In particular, bullion jumped to a new 5-month-high, while the Dollar index – measuring the strength of the greenback against other currencies – surpassed the level of 95, for the first time since mid-July. Moreover, the EUR/USD currency pair,  which is by far the main component of the dollar index, declined below 1.15.

What is the reason behind these happenings in the financial markets?

The announcement about tapering has not lessened investors’ appetite for gold. However, the US inflation rate, which just surged to a new 30-year-high, was a major market driver – effectively scaring the financial markets. 

This data could force the Federal Reserve to increase rates sooner than expected. In theory, this should be positive for the greenback, but only so long as inflation is kept fully under control. If those watching the financial markets notice that the Fed is forced to act, just to “run behind” inflation, the outcome will be very different. Namely, they could lose trust in the dollar.

Looking at the scenario for gold, the picture appears more complicated, but in some ways similar to that of the dollar. It is true that moderate inflation could be negative for gold, as it often entails higher rates and an increase in the implicit cost of holding gold. 

On the other hand, uncontrolled or partially controlled growth of prices could be detrimental to the economic system, which for gold, could make it even more crucial for investors’ portfolios. 

Kinesis Money Gold Analysis

The chart here, indeed, speaks for itself. The momentum on gold has improved, with a surpass of the resistance zones placed at $1,800 and $1,830, opening spaces for new rallies. Still, gold is gaining momentum. 

Both the short and medium-term trends remain positive, with potential targets for gold placed at $1,900 and $1,920.

So far today, early trading has seen the price consolidate laterally. Analysing the future expiry of December 21, the first support zone at $1,856, would likely be followed by another support zone of $1,845. A surpass of the recent peak of $1,865 would be a call for new rebounds.

Kinesis Money Silver Analysis

In conjunction with the gold rally over the last few days, the silver price has broken up the resistance placed at $24.9, returning above the key threshold of $25. 

In addition, momentum is also positive for silver, which started trading today by slightly outperforming gold. Indeed, silver is being traded close to its recent top of $23.35 and could be ready for new hikes.

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Carlo Alberto De Casa is an external Market Analyst for Kinesis Money.

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.