Gold and Silver: Who Will Gain the Upper Hand?
George Lam June 19, 2020 3:34 AM
The gold/silver ratio has nearly erased all of its gains made in early March, and a break-through, either way, seems approaching...
Spot gold ended 0.2% lower yesterday, though the precious metal has been trading within a consolidation range since mid-April, without making a meaningful breakout.
U.S. President Donald Trump tweeted that "a complete decoupling from China" remains a policy option, after Secretary of State Mike Pompeo's meeting with Chinese official Yang Jiechi.
Messages regarding the relationship between the two biggest nations continue to be mixed. Pompeo said China "recommitted to completing and honoring all of the obligations of Phase 1 of the trade deal between" the two countries. However, it is reported that Chinese officials were not "really forthcoming" during the meeting.
Source: Bloomberg (Gold/Silver Ratio Daily Chart)
Investors are still weighing the pace of economic recovery and the twists and turns in U.S.-China relationship. In fact, gold had outperformed silver when the coronavirus pandemic began, however silver saw a strong rebound since mid-March as major governments and central banks rolled out stimulus measures. Depending on how the key issues evolve, silver might get the upper hand if we see a solid economic recovery, or vice versa if the U.S.-China tension heightens. The gold/silver ratio has nearly erased all of its gains made in early March, and a break-through, either way, seems approaching.
From a technical point of view, both spot gold and spot silver stays on the upside as shown on the daily charts. Spot gold keeps trading within a bullish consolidation range. Investors might consider $1,680 as the nearest support, and a break above the month-high of May at $1,765 is needed for gold to challenge the next resistance at $1,800. Alternatively, a break below $1,680 could be a warning that gold is heading towards the next support at $1,645.
Soucre: TradingView, Gain Capital (Spot Gold Daily Chart)
For silver, it remains at levels below 2019's high despite a sharp rebound started in March. Currently, it is supported by a rising trend line and upside momentum remains strong. The level at $16.80 may be considered as the nearest support, with prices likely to test the 1st and 2nd resistance at $18.37 and $18.95 respectively. Alternatively, losing $16.80 would suggest that the next support at $15.80 is exposed.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.