Gold prices have been moving sideways since March and are now breaking below key support levels. A breach of $1,300 would put at risk a turnaround from the year-long downtrend. A bearish outlook for silver is also in play after the metal declined to a new cyclical low last week, although silver has less room on downside than gold due to its supply deficit. Silver’s deficit is forecast at 60 tons so far this year, down from 69 tons in 2017. Gold’s deficit in 1st quarter was 147 tons vs 118 tons last year avg., according to Thomson Reuters GFMS data, with miners expected to face higher costs for production and sales as China cuts import tax on metals this month.
Spot gold slid to a 2-month low of $1,290.70 on Friday and is now breaking below key support levels. A weekly close below February’s low of $1,286 would confirm the long term downtrend since August last year. A monthly close below $1,287 (2016 high) would confirm a bear market for gold in place since September 2011 when prices broke out of their multi-year triangle pattern and started rising.
GOLD UNWINDS WAR RISK PREMIUM
It has been moving sideways since March and is now breaking below key support levels. GOLD SPOT COULD FAIL TO CONFIRM TWIN TRIANGLE PATTERN AFTER LOWS OF $1,286.50, $1,285.00 (FOSTEC DATA). Gold was trading at a 2-month low and was caught in between the twin triangle patterns. Which are shaping up to form a bullish reversal pattern. However, a break below the important support level of $1,286 should provide extreme caution for bulls. This indicator is based on Fosters & Stratton’s Technical Analysis using 60-day moving averages of gold prices from January 2017 to January 2018.
A break below the February low of $1,285.00 would confirm a bear market for gold in place since September 2011 when prices broke out of their multi-year triangle pattern and started rising.
The daily chart shows that gold began its downtrend in the last quarter of 2016. When it broke out of a triangle formed with the exponential moving averages, which had temporarily halted its rise. Gold then took a correction in January, following. Which it declined to breach resistance at $1,300 before retreating to a Feb. 1 low of $1,280.40 before rallying back above $1,300 on Feb.. 3.
What is the relationship between gold, silver and copper?
Gold and silver are two separate markets with two different characteristics. Gold is a commodity traditionally used as a store of wealth whereas Silver is an industrial metal. Silver has been used in the production of electronics, optical and electrical components. Used in computers, telecommunications equipment, camera lenses and light bulbs since it first entered the market.
Copper has long been used as an industrial metal due to its strength as an electrical conductor. Which means that it can be used for all electrical applications including electric lines, cables, transformers etc. Copper prices are also closely correlated to gold prices due to the fact that it is required for electric usage.
Why does gold form a healthy triangle pattern with silver?
The appearance of a healthy triangle pattern is a reliable signal. That stock markets or commodities are at or near the bottom. This is because when prices become oversold, investors will start to question whether this is the beginning of a new uptrend or not, while they are in doubt they will tend to cash in their profits (sell their positions) making further gains on their capital. Hence, the price of gold and silver are closely correlated to each other in time except during short term periods in between those periods.
The relationship between the price of gold and silver is due to the fact that their movements are driven by a common factor, which is demand from investors. This is usually attributed to a combination of global economic growth and the performance of major industrial markets. Since investors love to diversify their portfolios by adding precious metals, the price movements are always in harmony.
Is there any difference between gold and silver?
In many cases both gold and silver act as hedging tools when it comes to investing. However, due to traditional reasons gold has been preferred as an investment tool as well as store of wealth on account of its shiny nature that attracts an investor’s inclination towards it for its aesthetic value. On the other hand silver has been used as a hedging tool due to its industrial usage that protects investor’s from losses arising from fluctuations in the prices of industrial metals.