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Calm Week on Gold and Silver

The market calmed down this week after two weeks downtrend really. It seems to that both metals took a new breath and heading higher. Silver almost touched $ 20. But finally we were moving most of the time within $ 1240 and $ 1260 zone on gold. Silver tried to stay over $ 19.5 most of the week but one day closed over and another below this level. Trading volumes were thin. We had free trading day in the U.S. on July 4th. Friday´s session was influenced by the payroll data from the U.S. and both metals sharply declined.

Gold finally closed on $ 1223.8 per ounce what was $ 11.5 lower compared to previous week. Silver closed on $ 18.9 per ounce what was $ 0.76 lower compared to previous week. The gold/silver ratio is 1 to 64.75 (i.e. you could buy 64.75 grams of silver for 1 gram of gold, it was 62.83 week before). So silver was less successful compared to gold this week. HUI index (index of the most important gold mining companies) was on $ 215.89 and was down $ 12.2 compared to previous week. XAU index (index of gold and silver mining companies) was down as well on $ 86.44 what was down $ 3.71 compared to the previous week. I expect that bullion banks decreased their net short concentrated positions on COMEX on gold as well as on silver but cannot confirm this because COT report was delayed due to the U.S. federal holiday.

We had non-farm payroll data on Friday. Both metals reacted to them negatively. It is probably because market participants are expecting that FED will react to data by taper of its policy of buying bonds. Behind price moves within this week we can find as well some fears connected with the unrest in Egypt. We had two central banks meeting (BoE and ECB) to discuss rates but their impact on the price of precious metals was not very visible.

Do we witnessing bottom is the usual question for this report for last few weeks? It is still difficult to tell. Gold certainly declined enough to bounce but there is still possibility to decline more especially if it breaks $ 1200 level. The next support will be on $ 1155 with possible decline to $ 1100. To expect uptrend moves we have to cross $ 1320. According to legendary analyst Luis Yamada $ 20 provided a strong support on silver but a full-fledged breach has opened the door for a return to the 2003 uptrend near $ 15-14. So we can still witness gold silver ratio on 1 to 70 or more (maybe 1 to 80 – 90 – 100) if anything happens within the global economic system which will indicate recession; e.g. in Japan or China. According to City analyst Tom Fitzpatrick “we may need the market to be more concerned about the financial/economic backdrop before Gold can get any real traction again.” In other words to push gold and silver higher we need some trigger connected with some economic uncertainties. Otherwise we will stay on these levels. At least for now.

Overview of the prices of gold and silver for the remaining periods:

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Gold chart

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Silver chart

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Source: upner.com, kitco.com

Matúš Pošvanc

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About matus.posvanc

Trhu so zlatom a striebrom sa venujem od roku 2011. Prešiel som rôznymi fázami a pohľadmi na problematiku. "Trh je manipulovaný. To je jasné!" Inak by cena zlata predsa nešla dole. "Zlato na úrovni 100 tis. USD? Žiaden problém." Najneskôr do pár rokov. "Futures trh je najväčšie zlo a tzv. papierové zlato je nutné zakázať". Nuž, po dlhom štúdiu tejto problematiky, som hlúposti a táraniny opustil. Ostalo to, čo považujem za podstatné. Význam zlata je veľký. Avšak bez pochopenia trhu okolo neho, sa sám od seba znovu neobjaví. Kúpiť zlato ako časť svojho portfólia má zmysel. Snažiť sa na zlate zbohatnúť? To je iný príbeh. Jednu jeho časť nájdete na mojom blogu.
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