Gold/Silver: Jackson Hole is a game changer
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
I know it's mid-August, but it indeed feels like Ground Hog Day with Precious Metals trapped on a merry-go-round of negativity where stronger economic data in the U.S. reaffirms the Fed's "higher for longer" theme that strengthens the U.S. Dollar and pushes yields higher.
Then in the overnight sessions, we get a series of weak Asian data where calls for China to "do something" get louder and louder. China then responds with minor accommodative measures to prop up the Copper market, Silver attempts to follow, and then the day session begins with a stronger U.S. data release.
You get the picture, the Dollar rallies, Yields move higher, Gold retreats. The cycle may break this week with Thursday's Jackson Hole symposium, where comments from Jerome Powell may give some indication that the interest rate hike cycle is over.
Daily Silver Chart
Silver futures are back near the trough of the mid-summer lows and remain comfortably within a $4 price band with $22 as support and $26 as resistance. I firmly below it will take a close over $23.06 to carve out a bottom where the next overhead resistance remains at the 200-day moving average, near $23.25.
Ultimately it will take a close over $23.93 to shift the bears to the sidelines and the downward trend to neutralize. Additional demand from solar and electric vehicles should limit a further selloff below $22. Any uptick in demand from these two sectors out of China will trigger a new recovery in Silver.
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Daily Gold Chart
Gold futures are trading near five-month lows, and as a "zero-yielding asset," it's tough to make its bull case, especially with debt instruments yielding 5% everywhere. Seasonally, Gold tends to bottom in the middle of August and has historically recovered until the end of the month. The weakness in U.S. Equities may drive investors into the safety of debt instruments, ultimately taking yields lower and boosting Gold. The chart pattern suggests that futures must close back above $1951 to carve out a bottom. It will take a move back above $1983 to switch the bearish trend back to neutral.
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