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Gold and silver, the correction continues

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Although the recent price decline in both gold and silver seems to be slowing down, it is evident from today’s price action that the potential for more downside in both assets still exists.

As of 4:30 PM EDT gold futures bases the most active December 2020 contract is trading off by $0.10 on the day, and is currently fixed at $1946.40. Spot or physical gold has had a steeper decline than its counterpart in futures. Currently physical gold is fixed at $1938.87 which is a net decline of just over $8 on the day, or 0.4 %.

Just as silver was the leader in terms of percentage gains when both precious metals were in rally mode, today it is the percentage leader in price declines when compared to gold. Silver futures basis the September 2020 contract is currently trading off by 1.37%, a net decline of approximately $0.38 and is currently fixed at $26. 775. Spot silver is currently down by $0.60 and currently fixed at $26.65.

Both precious metals had moderate to strong headwinds from dollar strength today. Currently the dollar index is up 0.45%, a total of 0.427 points and is fixed at 93.21. However, gold’s fall was tempered by market participants bidding pricing higher, while silver’s price decline was exaggerated by selling pressure.

In the case of spot gold traders were actively buyers today. According to the KGX (Kitco Gold Index) spot gold is currently fixed at $1941.30 which is a combination of buyers bidding gold higher by $4.20, and dollar strength taking $9.50 of value to yield the net change of the day which is a loss of $5.30.

The drawdown in silver today is a combination of dollar strength and market participants actively selling the precious white metal. The Kitco Silver Index is currently fixing spot silver at $26.71, which is a decline of $0.52 on the day. $0.13 of today’s decline is attributable to dollar strength, with the remaining decline of $0.39 a result of selling pressure.

Recent dollar strength has been attributed to the minutes of last month’s FOMC meeting released this week by the Federal Reserve. That being said with the uncertainty of the upcoming election, the global pandemic that continues to wreak havoc as the number of infections continues to mount, and mounting tension between the United States and China have curtailed any steep price decline in both metals.

In fact, when we look at a daily gold chart which contains a 50-day, 100-day, and 200-day moving averages, not only are prices above all three averages but the averages are aligned in the most bullish position possible. With the 50-day above the 100-day, which is above the 200-day moving average. On a technical basis this is a clear indication that even with a correction currently in play the overall market outlook for gold and silver pricing remains extremely bullish. The only question is how deep will this correction be, and how long will it take before it concludes.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer