Gold & Silver Market Analysis - Wednesday 29th September

Kinesis Money Macroeconomic Analysis

This week, the pricing of gold and silver has been hit by a new rebound of the U.S. Dollar and the rise of the 10-year US treasury yield. Investors’ speculation is guiding this trend, with clear insight that current inflation won’t be “transitory”, as it was predicted by central banks these past few months.

It is worth mentioning that this scenario will likely force the Federal Reserve to begin tapering as soon as November. But, is all this negativity around gold and silver really justified? Probably not.  

Looking ahead, medium and long term demand for precious metals appear solid, particularly for silver. Moreover, even if the Fed does increase rates, we will remain in an environment of low – or even negative – real rates, due to inflation. This could be supportive of large-scale gold and silver demand.

Watching out for the behaviour of gold and silver on the market during the months of December, January and February will reveal whether these precious metals display a positive seasonality, in line with historic trends.

Kinesis Money Gold Analysis

From a technical point of view, bullion has offered a signal of temporary weakness, breaking down the support zone of $1,745-1,750, which fell to a low of $1,727.

In the last few hours, there has been a significant recovery attempt, with the gold price rebounding to $1,740. Only a clear surpass of $1,750 would open space for future recovery, with the next resistance zone now placed at $1,760 and 1,790. 

In addition, a fall below $1,727 would show further weakness, which could trigger new sale orders, even if space for another decline appears limited at present.

Kinesis Money Silver Analysis 

In the same vein, silver continues to struggle, as its price appears unable to signal a solid rebound. The short-trend term remains bearish, with pressure from sellers still consistent. 

 Although, it’s important to note that silver has found a solid support zone at $22.1, an area that has performed as a stoppage zone during instances that previously threatened further decline. As long as silver continues to hold above this threshold, this could increase the chances of a consolidation phase, with some level of rebound to follow.

As explored beforehand, the long term scenario is expected to be very different. The demand for silver, in the production of electric cars, will spike in the next decade, while the expansion of photovoltaic technology (the process of converting light into electricity) is expected to advance further. What’s clear: investment demand for silver is set to abound.

Carlo Alberto De Casa is 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.