Gold and Silver forecast: Metals hit fresh 2024 highs

The big rally on precious metals have continued at the start of the new week, with silver yet again outperforming. Both metals eased off their highs amid profit-taking and were back to the flat line around midday in London. Still, the white metal is up a good 35% so far in 2024, compared to 18% for gold. Silver’s breakout last week means the metal may have paved the way for even more gains after being held back by sturdy resistance below the $30 level. Our gold and silver forecast remains positive and reckon new records could be on the way for the former and fresh 2024 gains for the latter.

Video: Gold and silver forecast plus insights on FX majors

Silver forecast: Metal adjusts to new life at multi-year territory above $30

Gold reached a new record high overnight after surpassing April’s peak of $2431 per ounce. The yellow shiny metal rose to as high as $2450 before easing off a tad. Meanwhile silver continued its rally, building on the significant gains from the previous week, with much of those gains coming on Friday.

Prior to Friday’s breakout, silver was gearing up for a sharp mover high as it made interim higher lows amid the absence of any bearish factors. Once it surpassed the $30 threshold, this triggered big stops of bearish traders and attracted buy orders from bullish traders who had been waiting for the breakout, adding fresh fuel to the rally. Silver had been consolidating for over 3.5 years before this major breakout, whereas gold had been hitting new highs in recent months. Additionally, copper experienced a bullish breakout a few months ago that is still ongoing strong. These trends indicate that silver’s breakout is likely to be sustainable, driven by strong fundamental factors as well as technical ones.

Gold forecast: What has been the key drivers behind metals’ gains?

Gold and silver have been supported for several reasons this year. More recently, a weaker dollar has provided the metals additional support. Traders have been selling into the dollar's recovery attempts since the release of the April non-farm jobs report at the start of this month. Multiple data releases have since fallen short of expectations, indicating that the US economic recovery is slowing, which could lower inflation and reduce the need for prolonged tight monetary policy. Additionally, the Fed's tapering of its balance sheet runoff has been another bearish factor for the dollar.

Furthermore, there are broader macroeconomic drivers at play for precious metals and other commodities like copper. China's various stimulus measures have bolstered demand or perceived demand for commodities, and we've seen improvements in Eurozone and UK data.

Therefore, the recent gains in metals are partly due to a weaker dollar and increased chances of a Fed rate cut, plus optimism over China. However, the majority of the gains have been driven by inflation-hedging demand and central bank purchases.

Silver forecast: Technical levels and factors to watch

Silver's big breakout from a three-and-a-half-year range is undoubtedly a major bullish development, potentially paving the way for the white metal to eventually reach the measured move target of the range break around $42.60. This target is calculated by adding the height of the 3.5-year range to its high point (i.e., $30).

Closing well above the key $30 level on Friday and near the week's highs suggests that bullish momentum could continue into at least the early part of this week. Many bearish traders are likely still trapped, with their stops not yet triggered. We already saw this scenario unfold at the Asian open overnight, with precious and base metals surging higher, pushing gold to a new record before it slightly pulled back.

Silver’s big breakout last week means we could well see a continuation of the upward move towards the mid-$30s this week. But whether or not silver will pull back to the key former resistance level of $30 once the impact of profit-taking at overbought levels take hold, remains to be seen.

Ideally, from a bullish point of view, I wouldn't like silver to pull back to $30 in the near-term, and instead I'll favour looking for a bullish continuation/consolidation pattern instead, before the metal potentially stages another rally. It would be best if that potential consolidation forms around current levels or slightly higher, instead of, say, the high $30s, so that it allows traders who missed out on the move to get on board while prices are still attractive. Among other patterns, these include a falling wedge, a bull flag, and various forms of triangles. Such consolidation patterns would also allow technical overbought conditions to be worked off through time than price action.

Speaking of “overbought” conditions, silver’s oscillators are starting to look stretched and will eventually need to be addressed either through price action, or more ideally, time.

Last week’s high at $31.60 is now among the most important short-term support levels to watch. This level was being tested at the time of writing, after the big upsurge at the Asian open was followed by some profit-taking. Below this, $31.00 could offer some support too. But the key level to watch is that $30 handle, which had offered resistance on multiple occasions in the previous 3 or 4 years, before last week’s breakout. If we get a retracement in silver prices in the coming days or weeks, then this level must hold to maintain the bullish trend.

On the upside, the 161.8% Fibonacci extension level of the short-term downswing from the April high ($29.80) to the early May low ($26.01) comes in around $32.13. Silver has already tested this level overnight, and went above it, before dipping on profit-taking. Let’s see if it will also break it on a closing basis. The 200% extension of this move is at $33.58, and the 261.8% Fibonacci extension comes in at $35.91. These are my subsequent short-term bullish targets, with the above-mentioned measured move target of the range break coming in at $42.60.

Apart from these levels, keep a close eye on round handles like $33.00, $34.00 and $35.00 etc.

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

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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