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Gold and Silver Sentiment to Rise Sharply in the Coming Months

18 December 2020

Precious Metals Commentary

Gold continues its strong recovery, but hit the resistance discussed in last week’s commentary (…Resistance in gold should come in at US$1888-1910…) with gold making a high so far at US$1896.  There is distinct resistance at the US$1908 level.

The Dollar Index is a big factor behind gold’s move as correlations between gold and Treasury-Inflation Linked bond yields (TIPS) weaken relative to early 2020. The DXY’s move to 89.73 takes it very close to the 50% retracement of the move from the 2011 lows to the 2017 high at 88.20, and along with medium-term target to 89.90 and 89.60 level, there is the suggestion that the recent move downwards in the Dollar index may pause soon. There are signs that non-commercials longs are tentatively trying to increase their exposure to the DXY from the very low levels seen in September and November.

CME Managed Money longs increased by 1.340 million Tozs by the 8th of December. Gold ETF outflows continue but in a muted manner.

The essentials behind gold’s rise are stimulus efforts with both parties stressing the need for action. The rise in Coronavirus cases underscores deepening economic risks through H1 of 2021, with the USD dollar slipping.

 XAU Daily Bars – a sharp break higher to the 61.80 % retracement and through the 50 day Moving Average (now shown)



Overview of gold ETF flows
Outflows continue but slowly, with total holdings down to 106.51 million Tozs. 



The Weekly SPX chart.
The SPX is relentless. Still looking for weakness once or if 3,785 is touched.

Silver…

Silver has broken up through the Daily Cloud resistance after trading below or within the Daily Cloud since late September. The traditional trendline resistance show in the bar chart below has also been broken through. Targets extend to US$32.60.
Silver ETFS reduced by around 2 million Tozs.
Silver Managed Money positioning changed very little on a net basis as fresh longs increased to 330 million and fresh shorts increased to 116 million, creating a net change of less than 400,000 Tozs.
Daily Bar Chart - XAGUSD



The RBA and the AUD
The AUD is benefitting from strong commodity export prices, particularly iron ore. Flash Services and Manufacturing PMI were good (56.00 and 57.40 respectively) The Unemployment rate was 6.80 %, was strong.
Resistance in the Australian Dollar is expected above 0.76.
Iron ore is still in a bullish trend but may struggle above US$168.
AUD Hourly with targets



The USD (via the DXY)
Deeper support in the long term at 88.22.