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Wish for the best, but prepare for the worst

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PREMIUM MEMBERS

The first day of trading this week resulted in moderate to strong moves in the precious metals across the board. The global economic recovery is the greatest challenge that the world has faced since the 2008 financial crisis. The necessary economic stimulus that will be needed from global central banks will require the largest capital expenditures in history

There is also the real need for additional fiscal stimulus in order to aid individuals who are in need due to their financial hardship.  It is for that reason that market participants and traders are under the expectation that interest rates will remain extremely low and that more stimulus will be needed.

Concurrently there is the reemergence of genuine concern regarding growing tensions from the United States and China. According to an article published in the South China Morning Post today, the headline read, “Are China- US relations drifting closer towards war?”

In the article penned by Shi Jiangtao he said, “The two superpowers have been embroiled in an economic and technological decoupling amid an unfolding new Cold War. Beijing and Washington have engaged in a global blame-game over the deadly coronavirus and are at odds on almost every front, from trade tensions to the South China Sea, Taiwan, Xinjiang and Huawei.”

Even more alarming is the recent tension over Beijing’s planned implementation of a draconian national security law in Hong Kong. Collectively these issues have created a widening distrust and accelerated hostility between the two superpowers. The chasm of distrust and hostility has widened to a degree that analysts have warned of a growing risk of an unplanned confrontation as relations worsen at an alarming pace. According to Chinese officials the unusually high fears and tensions are gradually drifting towards war.

Considering the alarming tension between our two superpowers and the massive amount of capital expended by countries worldwide the fact that we have seen gold and silver pricing rise dramatically is in line with the geopolitical and economic fabric that currently exists.

The European Union leaders met in Brussels and reportedly are near an agreement on a huge spending program which includes €750 billion allocated as a rescue fund, this as U.S. politicians are talking about funding an additional coronavirus aid bill.

Gold futures basis the most active August contract is currently trading at $1819 per ounce a net gain of ½ a percent or nine dollars per ounce. Silver gained almost 3% in trading today gaining $0.56 and closing at $20.33. This is the highest close for silver since 2016 when the metal ran to $21 per ounce.

Our technical studies indicate that there is still resistance for gold at $1830 per ounce with support just below $1800 and major support for gold at $1765 per ounce. Our studies also indicate major support for silver at $19.10 per ounce with major resistance at $21.30.

While we all wish for the best, we must prepare for the worst. It is for that reason that market participants and investors have turned to the safe haven assets of gold and silver as a viable means to address the economic fallout which is inevitable.

Wishing you as always good trading and good health,

Gary S. Wagner - Executive Producer