Gold & Silver Market Analysis for Wednesday 10th November

Kinesis Macroeconomic Analysis 

In the last few days, bullish pressure on stock indices has slowed down, as the financial markets consolidate after the acceleration seen in the first week of November. The overall tone remains positive, with the long-term bullish trend on stocks, still intact. Investors are looking for new drivers before changing their exposure to the markets and, overall, the volatility appeared relatively moderate.

In today’s early trading indices, Futures contracts are being traded in the fractional red zone, while the 10 year Treasury Note yield is showing no sign of a rebound, remaining below 1.50%.

The Forex market has seen some big movements of late, where the EUR/USD trading pair is now being traded just below 1.16, with the greenback recovering 0.10-0.20%.

This week, one of the few commodities showing directional movements, in fact, was gold. The yellow metal surpassed Friday’s resistance zone placed at $1,800, before continuing its rally yesterday, getting close to a new 5-month high. The small rebound of the U.S. dollar seen this morning has temporarily curbed the gold rally, even if bullion still remains solid.

Kinesis Money Gold Analysis

Even though the tapering has been announced, and is close to its beginning, there is a certain level of clarity that the Federal Reserve will be very cautious before raising rates. Moreover, the same approach – if not more dovish – will likely be adopted by the European Central Bank and the large majority of monetary institutions.

The only exception to this rule will appear with the central banks of emerging market economies (EMEs), since they are not likely – nor willing – to accept higher inflation rates. Therefore it is likely that their preference for adopting hawkish monetary policies will occur sooner. 

On a broader scale, this represents a minority, while the main scenario will remain extremely dovish with real interest rates still negative, considering the growth in inflation. Therefore, investors’ interest in gold remains strong, leading to the bullion price reaching its highest levels seen since June. Gold surpassed the key resistance zone placed at $1,830 and rallied up to $1,835.

The small decline shown this morning should not worry many investors, since the technical picture has strongly improved in the last few trading sessions. A weekly closure above $1,830 would represent another strong positive signal. In fact, the closest resistance – placed at $1,850 – does not seem strong enough to interrupt gold’s recovery.

In this hypothetical scenario, there could be a strong chance of seeing gold test the psychological threshold of $1,900. Further on this, there is potential for the reintroduction of the former all-time-high at $1,922, which gold reached in 2011 and only surpassed again in the summer of 2020.

Kinesis Money Silver Analysis

The silver price remains to be traded above $24, with a slightly more underwhelming picture than gold. Silver experienced a particularly sharp decline from $24.5 to $24.2, which has been partially absorbed by the markets – in just the last few hours. 

In this scenario, the ratio between gold and silver jumped from 74.7 to 75.3, before slowing down this morning to 75, as silver was recovering.

From a technical point of view, silver will offer a positive signal once it surpasses $24.5, with more space for new rallies if the price jumps above the former top of $24.9 – 25.

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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.