Fundamentals shape gold and silver futures

Both gold and silver are showing moderate gains on the day. These gains are a direct result of dollar weakness and bullish market sentiment which stems from the renewed hope for a greatly needed fiscal stimulus. This has rekindled the belief that there will be a fiscal stimulus deal forthcoming. U.S. House Speaker Nancy Pelosi met with the Treasury Secretary Steve Mnuchin on Wednesday, and spoke on the phone every day last week. This in an effort to discuss a bipartisan aid package.

Last week the Congress passed a $2.2 trillion fiscal aid package, however as it stands many analysts believe that it will not likely be approved by the Senate. On Sunday Pelosi said that, “Progress was being made on a coronavirus relief package.” The California Democrat, appearing on CBS's Face the Nation, indicated that she and White House negotiators were close to a deal, but blames Republicans for delays.

However according to CBSN Boston, “That progress, made between Pelosi and Treasury Secretary Steve Mnuchin, would still need to be approved by the GOP-controlled Senate in order to be signed into law. Senate Majority Leader Mitch McConnell suspended his chamber until October 19 after three Republican senators tested positive for COVID-19 in the wake of the president’s positive test. However, he has said that he could recall senators to hold a floor vote if a deal on a new economic package is made.”

According to the Washington Post, the fiscal stimulus bill could be completed by the end of this week. “Pelosi and Mnuchin revived bipartisan talks earlier this week and expressed optimism that an agreement could be reached. White House officials have in recent days privately expressed confidence that they could secure at least the outlines of a deal by the middle of next week, according to one person who spoke on the condition of anonymity to share details of private conversations.”

On Saturday afternoon President Trump tweeted from Walter Reed National Medical Center “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!”

Today’s gains in gold are almost split equally between bullish market sentiment and dollar weakness. This becomes greatly visible when we look at the KGX (Kitco Gold Index). According to the index spot gold gained $14.30 and is currently fixed at $1913.10. On closer inspection dollar weakness accounted for a gain of $7.60, a little over half of today’s gains, with the remaining $6.70 attributed to bullish market sentiment.

Gold futures basis the most active December 2020 Comex contract gained $11 in trading today (+0.58 %), and is currently fixed at $1918.60. The U.S. dollar index lost
(-0.45 %), which means that bullish sentiment for gold futures accounted for +0.13%. This is the highest closing price gold has traded to since September 22.

Silver futures basis the most active December 2020 Comex contract gained 2.04%, a
$0.49 gain taking current futures pricing to $24.52.

Our technical studies indicate that there is moderate support for silver futures at $22.94 which corresponds to the 38% Fibonacci retracement. Major support for silver continues to be at its 100-day moving average which is currently fixed at $22.34. These studies also indicate that there is major support for gold at $1860 which occurs at the 100-day moving average, and 38% Fibonacci retracement. The next level of resistance occurs at the key psychological level of $1900 per ounce, with major resistance at the 50-day moving average in both gold and silver. For silver this average is currently fixed at $26.13 and for gold at $1952.30.

Wishing you as always good trading and good health,