Gold & Silver Overview: Will those assets advance this week?

Sep 12, 4:22 pm
Silver_technical analysis_1804الفضة

Gold and Silver are still positive on the year. Gold added more than 20% since the beginning of the year, while Silver advanced by more than 40%. This is primarily due to the fact that central banks' cheap money is still increasing, and easy monetary policies are here to stay. Last week, Gold managed to advance all the way to 1350 but failed to sustain these gains, while Silver touched $20 but also retreated to $19. This is due to the strong dollar move at the end of last week, supported by many of the Federal Reserve’s members who increased the chances for a possible rate hike by the Fed later this month. The question remains, will those assets stabilize and/or advance this week? The short answer is yes if is possible, but they both need fundamental catalysts.

Last week, Gold managed to advance all the way to 1350 but failed to sustain these gains, while Silver touched $20 but also retreated back to $19. This is due to the strong dollar move at the end of last week, supported by many of the Federal Reserve’s members who increased the chances for a possible rate hike by the Fed later this month. The question remains, will those assets stabilize and/or advance this week? The short answer is yes, if is possible, but they both need fundamental catalysts.

Gold

From a technical analysis point of view, the general trend remains strongly bullish as long as it stays above $1300, which represents its 100 DAY MA. However, the technical indicators are overbought given the fact that the last push higher in gold started in Mid-June, reaching the high of the year at $1376 in July. Since then, Gold has been moving sideways between $1310 and $1350. In the meantime, the current correction might continue for a few days and Gold may test last week’s lows around $1304.

However, US economic releases this week are likely to be the main driver of any rally. Why? Because we will be focusing on US inflation data, which is set to slow down further after the recent slowdown in most of the economic releases including the Manufacturing and the Services sector, as well as Crude Oil Prices. If we look at the latest CoT report by the CFTC, we can clearly see that traders are still buying Gold and getting rid of their short positions, which reached the lowest level since February of last year.

However, US economic releases this week are likely to be the main driver of any rally. Why? Because we will be focusing on US inflation data, which is set to slow down further after the recent slowdown in most of the economic releases including the Manufacturing and the Services sector, as well as Crude Oil Prices. If we look at the latest CoT report by the CFTC, we can clearly see that traders are still buying Gold and getting rid of their short positions, which reached the lowest level since February of last year.

This Week's Strategy: Buying on dips as long as it stays above support level.

Silver

Silver has the same scenario; however, it is way stronger than Gold this year. The technical outlook also remains bullish as long as it stays above $18. However, the technical indicators are overbought and crossed over to the downside, which increases the possibility for another leg lower in the coming days. Yet and as noted above, the short term technical outlook is bearish, but the medium-long term outlook remains bullish, which keeps the chances for another push higher in the coming weeks. However, a technical retracement is more likely at the beginning of this week before the upside rally resumes.

On the downside view, the possible target stands at 18.50, which should be watched very carefully as a break through that support would clear the way for further declines ahead, probably toward $18. On the upside view, the $19 remains a solid resistance. Weaker than expected US data this week might be the catalyst to re-test this level and might also be the catalyst to break above that resistance as well. Therefore, traders need to watch out from this week's economic releases. Finally, the latest CoT data by the CFTC is strongly suggesting the upside outlook because long positions are still near their record high, while shorts are still on the downside

This Week's Strategy: Buying on dips as long as it stays above $18.50 / $18.00

Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.