Gold analysis: Is silver about to outperform gold?

Gold analysis: Weaker start in November follows 7% rise in October
Peak interest rates narrative could help precious metals
Gold-silver ratio falls from key resistance

Precious metals prices have weakened over the last couple of weeks, following gold’s impressive +7% gains in October, and silver’s not-so-impressive 3% rise. Last month’s gains for gold were mostly driven by safe-haven demand as the flare up in the Middle East conflict saw investors rush out of risk-sensitive assets. The precious metal rallied last month even as US bond yields hit fresh 2007 highs. At the start of this month, we have seen yields drop back sharply but this has not had any positive impact on gold prices yet. Investors have perhaps found stocks and bonds as better investment propositions than gold, with the latter paying no dividends or interest, and costing money to store. What’s more, with signs of peak inflation around the world, and gold prices being not too far off their record levels, some investors are not comfortable buying gold at these prices and are thus waiting for a deeper pullback before potentially pulling the trigger. However, with yields declining dip-buyers are lurking. So, be on the watch out for a bullish reversal as both gold and silver test key support levels. I am of the view that silver has more upside potential than gold from here.

Gold silver ratio falls from key resistance

Supporting my thesis that silver may outperform gold, the gold-silver ratio has been banging at overhead resistance around the 87.25 to 88.00 range in the past couple of weeks, following the big rally in September and October. So far, resistance has held here, suggesting that silver could be about to outshine gold on the long side, or fall less than the yellow metal in the case of a sell-off.

Silver technical analysis

At the time of writing, silver was down for the third day, but off its earlier lows after testing the top of the key short-term support range between 22.20 and 22.40. This area had been support in the past before a sharp breakdown in October below here failed to materialise into anything major. Consequently, silver bulls quickly reclaimed their lost ground and are now trying to defend it again as price tests this zone from up above. What we want to see here from a bullish point of view is the formation of a bullish-looking candle on the daily time frame to provide the green signal for the bulls waiting to jump on board. If such a signal is not seen, then the wait must continue given that there is no clear directional bias on silver prices at the moment, and given the fact that silver is below the 200-day average.

Gold technical analysis

The key area of support for gold is seen between $1931 to $1953, which I have shaded in blue on my chart. This area was previously resistance on a few occasions between August and September. Now that gold has broken above this zone, it better hold here for the bulls to maintain control. We have the 200-day average also cutting through this zone. A potential break below here on a daily closing basis would be a bearish development.

Source for all charts used in this article: TradingView.com

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.