The outlook for precious metals has improved in recent weeks, as gold shines for investors fleeing to safe havens and central banks worldwide turn towards a more dovish stance.
The gold price gained around 150 dollars an ounce in October, jumping from $1,840 to $1,990. Silver also experienced a rebound. The silver price hit $23 an ounce after a spectacular come-back that offset the decline to $20.5 posted in the first week of October.
In this outlook and forecast, we explore the trends of gold and silver prices, the macroeconomic landscape and the main catalysts likely to drive the prices of these precious metals in November.
Gold Recovery Amid Geopolitical Tensions
The price dropped from $1,920 in the second part of September to $1,810 and early October, as investors mulled over the impact of interest rates potentially staying higher for longer.
This decline was followed by a stronger recovery for gold, off the back of a changing geopolitical and macroeconomic scenario. October was marked by the Hamas attack on Israel and the response on Gaza, escalating fears that the conflict could spread to the wider region or even further if the international forces were to actively support either side.
Central Bank to Move Towards Dovish Stance?
High interest rates (currently at 4.50% in Europe and 5.50% in the United States), are starting to cause a slowdown in economic growth. This, in conjunction with geopolitical fears, is increasing the chances that central banks will need to move to softer measures in the near future.
This landscape is boosting investor appetite for safe-haven assets and gold is widely considered the safe haven par excellence. The return of the price of gold close to $2,000 seems to be quite a natural move at this stage, with space for even further growth.
Technical Indicators Appear Bullish
In just one month the scenario for gold has changed dramatically. The price has completed a reversal and gold remains well placed for the coming weeks.
From a technical point of view, it looks bullish, even if the recent gains raise the likelihood of a consolidation pause, which could trigger a phase of lateral trading.
A clear break above $2,000 would make space for further gains, with a medium-term target close to the all-time high of $2,070/2,080. To see gold approaching these levels, we would need some further dovish indications from the central banks.
If a correction were to take place, the first support zone would be placed at $1,950, with further key levels at $1,920 and $1,900. Looking at the price of gold per gram, the precious metal is trading above $63 per gram, while maintaining above €60.
Silver Price Outlook & Forecast
After a dramatic start in October, with a collapse of around 5% on the first trading day of the month, silver managed to reverse losses, with a solid rebound in mid-October.
The price of the precious metal jumped from a 6-month low of $20.5, up to the resistance level of $23.6-23.7 (the peak reached in the second part of September).
From a technical point of view, the short-term trend is still positive, even if silver appears less strong than gold. The medium-term analysis shows that in the last 6 months, the price of silver has been posting declining tops and lows, which is typical of bearish trends. Only a clear break above the resistance level of $23.7 could bump silver out of this channel, potentially triggering new rallies.
In case of new declines, there is now a solid support zone just above the $22 mark. Silver holders should not be concerned, as long as silver manages to remain above this area.
On the other hand, a new decline below this level could make space for further falls, weakening the trend.
The Gold/Silver Ratio
The relative strength of gold against silver is confirmed by the “gold/silver ratio”, the number of ounces of silver necessary to buy one ounce of gold.
Last month, this value increased from 83 to 87, showing that gold has outperformed silver. Investors are still looking for safe-haven assets and the yellow metal is perfect for this purpose.
Although silver is also stored by investors, the component of the demand coming from the industrial sectors for the grey metal (particularly from photovoltaic and electric car components) accounts for almost 50%, against only 10% for gold.
Looking Ahead – November & Beyond
Central Banks’ monetary policies and geopolitical risks are likely to remain the main drivers in November.
In their recent meeting, the European Central Bank kept rates unchanged at 4.50%. This pause came after a streak of 10 hikes in a row.
Investors are convinced that the Federal Reserve will also keep rates steady, in advance of the FOMC meeting on November 1st. There is also a good chance that the US central bank will do the same in the last meeting of this year, scheduled for December 12-13th.
Investors are eager to discover if the peak interest rate level for this cycle has been reached and when the ECB, the Federal Reserve and other major central banks will start to cut rates. Rate cuts could well materialise in the second or third quarter of 2024, but the precise timing and pace of the easing process will depend on the macroeconomic data released in the next few months.
So far, the US economy has remained strong but the high cost of money is starting to impact it; for example, in the last few months, the requests for new mortgages have fallen to a 28-year low.
Any dovish signal from central banks could pull down the yields, giving further fuel to the gold and silver rally.
On the other hand, if central banks continue to raise rates – a scenario that seems relatively unlikely at the time of writing – the recovery attempt seen in the last few weeks will incur more obstacles. Precious metals, particularly gold, are also expected to remain sought after due to the intensifying geopolitical scenario of the last few weeks.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
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