Mixed Results as Silver Moves Higher and Gold Moves lower

As far as gold and silver go, typically they run in tandem, with both precious metals moving higher, or lower during a trading day. While there can be major differences in the percentage gains when both metals move higher, or the percentage drawdown’s when they move lower, for the most part they run in the same direction.

The same observation can be made when we compare physical or spot gold to gold futures, and physical silver to silver futures. The majority of the time both gold futures and spot will run in tandem either higher or lower, with the same being true for silver.

That is certainly not the case today. When we compare the direction that gold futures moved, and then compare that to the direction physical gold moved today we see that they moved in opposite directions.

As of 5 PM EDT Gold futures basis the most active December 2020 contract is currently trading down by  $16.00 and is fixed at $1954.30. Spot or Forex gold gained $18.55 in trading today, which is a net gain of almost a full percentage point and is currently fixed at $1946.81. As recently as last night the spread or differential between spot gold and gold futures was approximately five dollars. That spread has widened in the last 14 hours in essence doubling the price difference between gold futures and physical gold.

Silver futures basis the September 2020 contract is currently trading unchanged at $27.34, with its spot counterpart currently trading up $0.90 at 27.21, which is a net gain of 3.40% on the day.

One plausible explanation that might account for spot silver and gold having greater gains than their futures contract is the incredible demand for physical gold and silver and the electronically traded funds SLV and GLD.

Another possible explanation is that market sentiment is factoring in a belief that by December the current global pandemic will have subsided somewhat, and the economic hardships and contractions which the majority of countries face will have improved.

Currently our technical studies indicate that the recent price correction in both gold and silver might be on their last leg down. The upside to this model is that when this current correction runs its course it will mark the beginning of a final fifth wave which will take gold prices to a new all-time record high.

Wishing as always, good trading,

Gary S. Wagner