Silver, U.S. Dollar Are Catalysts To Drive Gold Prices Higher - Hecht
(Kitco News) - With the precious metals stuck in a near-term trading range, one commodity analyst continues to watch silver and the U.S. dollar as the two catalysts to drive prices higher in the short term.
In a report published by Seeking Alpha, Andrew Hecht, creator of the Hecht Commodity Report, wrote that the U.S. dollar has been in a downtrend since early 2017 and there are signs that the currency is entering a long-term bear market.
“The long-term trading pattern of the currency suggests that we are just in the second year of a bear market that could last as long as seven years,” he said in his commentary. “If the pattern holds in the dollar and when it comes to the inverse correlation with precious metals prices, we could look forward to more than five years of a dollar bear and gold, silver, and platinum bull run.”
In particular, Hecht said that he expects silver to be the spark that ignites the broad market rally. Hecht noted that there are technical signs pointed to an end in the white metal’s consolidation phase. He added that silver prices need to break through key resistance at $18.16 an ounce.
“If silver were to rise above that level, it would likely carry the other precious metals to new heights,” he said. “It is likely that gold… is waiting for a signal from silver before it makes a move and climbs above the technical level and the $1,400-per-ounce barrier.”
Both gold and silver have been struggling lately as the markets face an impending interest rate hike next week. Silver continues to underperform gold prices as the gold ratio on Kitco.com continues to trade near multi-year highs, around 80 points.
April gold futures last traded at $1,323.30 an ounce, down 0.29% on the day, while May silver futures last traded at $16.55 an ounce, down 0.46% on the day. Many technical analysts see $17 an ounce as an essential level that silver needs to overtake to regain investor interest.
According to many commodity analysts, markets are in a holding pattern, waiting for more clarity regarding the trajectory of further U.S. interest-rate hikes in 2018. In its December projections, the Federal Reserve forecasted that it sees three rate hikes this year; however, expectations are starting to grow for four rate hikes.
Despite these growing hawkish expectations, many economists have noted that the current economic data and the ongoing threat of geopolitical uncertainty do not support aggressive monetary policy action this year.
According to some commodity analysts, gold and silver could push higher next week if the Federal Reserve maintains its forecast for three rate hikes. Less hawkish action from the Fed would also provide little support for the U.S. dollar, which is struggling to make gains against a basket of global currencies.
The U.S. dollar index last traded at 89.78 points, relatively flat on the day.