Gold and silver prices seeing some follow-through buying following Friday’s breakouts
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Gold and silver prices seeing some follow-through buying following Friday’s breakouts teaser image
Gold and silver are starting the week with increased volatility as investors continue to react to the precious metals' breakout moves on Friday and extend their follow-through through Sunday evening.
Overnight, gold futures rallied to a new all-time high of $2,454.20 an ounce; meanwhile, silver prices surged to $32.75. Although the precious metals were off their recent highs as the North American trading session kicks off, they are attracting some new momentum.
June gold futures last traded at $2,422.60 an ounce, up 0.20%on the day; meanwhile, July silver futures last traded at $31.81 an ounce, up 1.74% on the day.
Looking ahead, analysts expect that gold and silver prices will move higher. However, they recommend that investors avoid chasing the market at current levels.
David Morrison, Senior Market Analyst at Trade Nation, said that while silver looks overbought, last week’s move above $30 an ounce was a significant breakout.
“Silver has made incredible gains over the past fortnight, and it does look overbought at current levels. That would suggest that some profit-taking could come in now. But traders would have to be very brave or foolhardy to short a market moving this way,” he said in a note Monday.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, said that although gold looks a little overbought, it remains a “buy on dips.”
“We believe some patience is called for, not least considering that investors may need more time to adjust and adapt to current high price levels. This includes central banks, major buyers since 2022, and whether their political motivation to buy bullion lifts their willingness to pay record prices,” he said in a note.
Hansen added that silver could have more potential than gold as it is just seeing its breakout move.
“Having already recorded the highest close in 11 years, a break could potentially set in motion an additional reaction from momentum-following funds, currently holding a relatively small net long futures position. The gold-silver ratio, which measures the relative strength between the two metals, trades around 80.5 ounces of silver to one ounce of gold, down from a January peak above 92, yet still above support at 78.50 and not least 76,” he said.
Analysts note that silver is finally outperforming in the precious metals sector as it is attracting significant attention as both a monetary metal and an industrial metal. Copper’s move to a record high above $5 per pound is creating some solid momentum for silver.
At the same time, relatively mixed inflation data last week is solidifying expectations that the Federal Reserve is on track to cut rates two times this year, supporting gold prices, which in turn is positive for silver.
“Given the current economic indicators and the anticipation of further dovish signals from the Federal Reserve, gold prices are likely to remain bullish in the short term,” said James Hyerczyk, Market Analyst at FXEmpire.com.
As to what levels traders and investors should watch, Julia Cordova, Founder of Cordova Trading, said that gold needs to hold $2,352.70 on any major correction.
Looking at silver, Cordova said that after Friday’s breakout, it has room to move higher.
“The daily measured move is now $32.785, and the weekly targets are $34.835 (inverse head-and-shoulders measured move) and $35.69 (bull flag measured move). $29.855 is the magic number that bulls want to hold on any pullback,” she said in her weekly report Sunday.
Kitco Media
Neils Christensen
Tim Moseley