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Saturday, January 30, 2021

Gold Price Will Follow These Developments Next Week


Kitco analyst Anna Golubova focuses on remarkable developments regarding the price of Gold in her article today. Let's take a look at Golubova's comments.

Gold and Silver

As previously reported, the precious metals rally on Friday resulted in a 1% increase in the price of Gold and a 5% increase in the price of silver on a daily basis.

However, when you look at the image this time, it seems that Gold is after silver. Because silver is seeing a new wave of interest.

Bart Melek, head of global strategy at TD Securities, said, “We made a good move on silver and gold. There are apparently a lot more silver enthusiasts out there, ”he explains.

Reversing Condition

Analysts told Kitco News that silver generally follows in the footsteps of gold, but this week points to the opposite.

“Friday's price action has nothing to do with gold,” said Peter Hug, global trade director of Kitco Metals. It mostly stems from what happened in the stock markets and Reddit posts. There are now articles encouraging investors that there are developments on silver that are driving the showrt squeeze and much higher prices are being offered. Usually silver reacts to gold. This time it reacts to gold and silver ”.

Silver rose from about $ 25 on Thursday to about $ 27.80 on Friday, while March Comex futures were trading at $ 27.36, up 5.55%.

Meanwhile, gold rose from the $ 1,840 level in the past two days to about $ 1,880, and April Comex futures traded at $ 1,860.60, up 1.05% per day. Hug uses the following expressions at this point:

“There is a significant retail interest in silver both in the physical market and in ETFs. Also, some mining stocks are on the rise, such as the GameStop phenomenon, which may be of short interest. This is crazy. It's chasing the market. If this continues, gold will rise. "

Walsh Trading co-director Sean Lusk said there is evidence that Robinhood investors are invading the silver market.

“If you look at the action regarding buy volumes on options, they have exploded. There is a huge explosion in call volatility and option growth. There are signs that new investors are entering the field. "There are also increases in the gold market," he says.

Precious Metals Market

The precious metal market, especially silver, is starting to attract great attention. Lusk said that this may continue to push prices up, especially given the core values ​​are also appropriate.

Analysts said that interest in silver has spread below and could help prices push to $ 1,900 and above next week.

Foreseeing that there will be a rise for gold in the short term, Melek said, “There is some correlation trade with this. Basically we saw the US dollar loosen a little on Friday as well. But when there is an interest in silver, there is an interest in gold. Talking about silver reinvigorates gold investors. Metals have many of the same driving forces. But silver is much more volatile. " in the description.

Melek added that whether this increased interest will lead to a massive increase in prices will attract the attention of a new viewer who has not looked at precious metals before.

“This can generate more indirect than direct interest. The Reddit phenomenon has warned the wider market of silver and caught people's attention.

Warning Signs

One of the biggest problems of this madness is to warn about how dangerous it can be to chase the market. For example, GameStop stocks can be taken.

Hug stated that it is too early for gold to rise this much, the US dollar is still trading horizontally and the US stimulus plan is still not approved.

Hug stressed that the last time silver was around these levels, gold traded near record highs above $ 2,060.

“Silver is booming and gold is still $ 200 from its summer high. Silver is only a dollar away. Is it under gold worth? Or is silver overvalued and should you stay away? These questions need to be answered. "

Hug opens the door for $ 1,900 if this chase continues until next week and if gold can close above $ 1,872. Especially if the silver continues to perform better.

Lusk added that if gold could reach $ 1,895, the precious metal could defy $ 1,950 in the short term. But a move below $ 1,800 per ounce could trigger a sale of up to $ 1,740.

Macro View

Analysts point out several well-known drivers such as currency printing, more incentives, the compliant Fed and inflation risk, noting that the overall environment remains positive for gold.

“There is still China on the geopolitical front. The new administration continues to print money. Trust in anyone's fiat currencies is declining. Commodity inflation is also likely to come. This means a rise for metals. ” says.

Developments indicate that this year is a suitable time for gold and silver to rise.

Stating that the foundations are good in gold and silver, Melek added that he expects a narrow market in silver.

“Investment activity will be strong in both precious metals. We do not expect interest rates to rise anytime soon, and real interest rates are not particularly rising for now. ”

There is a very supportive Federal Reserve in the markets as the uncertainty surrounds the COVID-19 outbreak, given all new strains and vaccine issues.

Melek said, “The current liquidity crisis for small businesses has turned into a bankruptcy crisis. The economy is stuck with too much collateral damage. This means that the economy requires a significant amount of continued incentives to get us to full employment. ” says.

Kevin Grady, president of Phoenix Futures and Options LLC, said data remains critical from a macro perspective.

“Despite all this money pressure and incentives, gold should really be affected. We should see a more natural purchase. We do not see any speculative interest in gold. It may be going somewhere else. Bitcoin's movement makes me curious. It can damage gold. "

What to Watch for the Next Week for Gold?

On the data front next week, the biggest announcement will be US employment figures from January on Friday.

ING economists said, “After December saw a drop in jobs around 140,000, all eyes will be on the January employment report. We expect to see a modest positive figure given a good start to the year, according to high frequency spending data. " using the expression.

There are also ISM manufacturing PMI on Monday, ADP employment and ISM non-manufacturing PMI on Wednesday, factory orders and jobless filing on Thursday.

On top of that, the markets will pay close attention to any refreshing developments next week.

“It seems increasingly likely that there will be a relaxation to receive adequate support. The package may need to be divided into two, more controversial aspects postponed and included in the budget reconciliation process. " says.

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