Gold & Silver Market Analysis for Monday 25th October

Macroeconomic Analysis

At present, analysis of the financial markets shows that investors are in a ‘risk-on’ mode. Last week, the majority of reports detailing US quarterly earnings, presented figures that were higher than the forecasts, confirming a sweeping recovery for the country’s economy. 

This week, there will be plenty of notable happenings in the macroeconomic calendar. The European Central Bank (ECB) meeting to discuss monetary policy is scheduled for Thursday. Coinciding with this, the Bank of Canada and the Bank of Japan will also be in discussion this week, respectively.

Major US companies will continue to release quarterly earnings, with the figures of Facebook, Apple, Amazon, Microsoft, Google to be revealed. Investors will certainly be focusing their attention on the forecast of the GDP growth in the third quarter of 2021, for the Eurozone and the US. Of course, data on inflation will also be noteworthy for investors. 

On the Forex (foreign exchange) market, the Australian and New Zealand dollar remain strong, while the EUR/USD trading pair is being traded just above 1.165. After a recent recovery, the British pound could face renewed trouble if the UK government reinstates Covid restrictions – such as control around mass gatherings or the hospitality sector – as the number of cases continues to rise. 

A Positive Environment for Precious Metals

Last week finished with gold and silver in a strong, bullish trend. Momentum remains positive for these precious metals, as investors are buying to diversify their portfolios. Despite the context of investors in “risk on” mode, there is still an element to investors buying precious metals as a safe-haven asset.

So, why is this sudden inflow of precious metals happening?

First of all, even if the Fed announce a first rate hike in 2022, interest rates will remain relatively low for a long time, therefore supporting the sector. 

Gold and precious metals exist in a very specific niche of the commodities field, but they are still part of them. The major trend for the commodity sector as a whole is still strongly bullish, with some positive reflex on precious metals as well.

In addition, the demand for gold and precious metals comes as investors seek a hedge against fluctuating market risk. At the same time, US stock indices indicate that there is still an appetite for risk since they are achieving new highs. With the Federal Reserve soon to announce the beginning of tapering – which already seems well-priced by the markets – the added legal jurisdiction facing Evergrande property tycoon, could have a further impact overall. In addition, the risk of inflation and stagflation has not disappeared just yet. 

Gold is often viewed as a barrier against a prospective crisis on the Forex market, which in turn creates a loss of credibility for central banks. After years of hyper monetary expansive policies, this may generate new rallies on precious metals. Moreover, the slowing down of the dollar rally seen in the last two weeks was enough to trigger a rebound.

On the other hand, silver is experiencing major physical demand, which is triggering a recovery for both these precious metals. In particular, silver has witnessed solidity in its demand and an expectation for its growth in the last couple of years. This is mostly due to the demand for photovoltaic technology and its use in electric cars component production.

Gold Price Analysis

The gold price remains in a positive mode. The price is now toying with the resistance placed at $1,800 and a clear surpass of these levels could trigger new rallies. With a potential target at $1,830, there is the later eventuality of $1,900 – 1,920 to consider.

There will be a clear signal of weakness if prices fall below $1,770, with the trend set to change if prices can break down the support zone placed at $1,745 – 1,750.

Analysing the price in dollars per gram, as we can see from the Kinesis Exchange chart, a clear surpass of $57.9 will open space for new recoveries.

Silver Price Analysis

The silver price is being traded in the region of $24.4 after having tested $24.8 – 24.9 on Friday. It seems that silver is consolidating after the recent rallies, as the price is still 5% higher than just a week prior, and far higher than the support zone of $24. This bullish mode will find further strength if prices break up the resistance placed at $24.9 – $25.

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.