(Kitco News) – The precious metals market is flashing warning signals as gold, silver, platinum, and palladium have all entered severely overbought territory by key technical measures, according to precious metals analysts at Heraeus.
In their latest precious metals update, the analysts wrote that after setting a new all-time high above $51 per ounce last week, “silver’s near vertical rally has triggered a series of cautionary signals across both technical and structural fronts.”
“The RSI has remained deeply overbought since August, while volatility – measured by the average true range – is at a 14-year high,” they said. “A pronounced deviation away from the 200-day moving average (200-dma) also signals the market is stretched to extreme levels. The last instance of such a divergence occurred during the post-Covid-19 boom, and after the price peaked it fell by 27% over the next two months.”
“Compounding concerns is the backwardation of the futures curve, with CME contracts 12 months and beyond trading at a discount to spot,” they noted.
Heraeus said that last week’s silver rally ran into some profit-taking before continuing on through the $50 per ounce psychological level.
“ETFs trimmed holdings by 7.6 moz in early-week trading resulting in three consecutive sessions of outflows amid profit taking,” the analysts said. “Strong dip-buying quickly absorbed these outflows, adding back 8.3 moz and driving spot prices to an all-time high above $50/oz and year-to-date gains to 70%. Near-term market tightness is being reinforced by implied one-month lease rates which spiked to around 8% at the start of the month and jumped higher last week.”
“The forward curve also reflected significant strain in the physical market, slipping into a steep backwardation stretching out to 2027,” they wrote. “The nearer-term December 2025 contract traded at a discount of more than 4% to the spot price. Silver’s recent listing on a draft US critical minerals list has sparked renewed speculation, driving additional flows into COMEX warehouses and a severe dislocation in the physical market which is continuing to intensify liquidity pressures. COMEX stocks hit an all-time high of 532 moz this month, while LBMA inventories have fallen to 790 moz in September, down more than 30% from their 2021 peak.”
Silver set a new all-time high of $52.071 during Monday’s trading, and the price continues to hover close to the $52/oz level.
Spot silver last trading at $51.590 per ounce for a gain of 2.71% on the daily chart.
And silver is not the only precious metal giving warning signs. “Gold, platinum and palladium have all also entered severely overbought territory, extending well beyond their 200-dma,” the analysts said.
“Gold now trades nearly 20% above its long-term trend, while platinum has held above that threshold for the past two weeks,” they noted. “Palladium’s recent breakout also pushed it into similar territory last week. Readings this high have typically been followed by corrections and sometimes more significant bear markets.”
They said the yellow metal is at an inflection point after breaching $4,000 per ounce, and “it is hard to tell if that is as far as it can go, or if it is another new high on the way to further gains.”
“The gold price has gone up for eight consecutive weeks, which is unusual but not unprecedented, and is very overbought on both daily and weekly timeframes,” they noted. “Gold is in a bull market and has strong momentum, and that can carry it higher for quite a while before there is another period of consolidation, whether shorter and shallower, as happened from April to August this year (-11% largest drop), or longer and deeper, as took place from August 2020 to October 2022 (-22%). A correction of similar size or duration to those would not be unusual. In the short term, a down week would be normal as prices have rarely risen for eight or more consecutive weeks even if the rally then resumes.”
Gold also set a new all-time high of $4,104.02 per ounce at 10:52 am EDT on Monday morning.
Spot gold last traded at $4,097.94 per ounce for a gain of 2.02% on the session.
