Political Risks Boost The Precious Metals Prices

Jun 07, 5:52 pm
Gold prices

Once again, if you have been following our previous reports especially about Gold and Silver, you would be able to explain why and how metals recovered back up after declining significantly last month.

In the past few weeks, we were confident that Gold and Silver are likely to recover most of the recent declines, despite the fact that many fundamentals and technical signals were showing the possibility of deeper declines.

Gold and Silver finally recovered their recent declines, nearing this year’s high and both proved that they are strong enough for a potential rally ahead.

Catalysts

There were many catalysts for the recent rally, but what was interesting is that the events that happened the past month were a positive factor for metals, in addition to the economic releases that came in contrary to the market estimates.

One of the catalysts is the continuous decline in the US Dollar Index, which fell all the way back to 96.50 earlier this morning, and this is the lowest level since November.

Besides USD declines, the US economic releases came in with shocking slowing down.

The US Jobs Report came in contrary to the market estimates. The unemployment rate kept on sliding to new levels, haven't seen since the financial crises, but what matters for the Fed is the wages growth in addition to the growth of new jobs.

The numbers showed that the jobs creation pace has slowed down significantly, as there were significant downward revisions to the previous figures, including March and April.

Such revisions have eased the possibility for a rate hike by the Fed in June, leading traders and investors to rush to safe haven assets including Gold and Silver.

Where Do We Go From Here

In the meantime, the uptrend is here to stay. However, traders need to keep an eye on some political events which may keep metals on the rise in the coming days.

Tomorrow, we will be waiting for the British general election, where the conservative party is set to win the election. However, the public polls were wrong about Brexit and the previous elections.

Therefore, another surprise is still possible, and should it happen, Brexit uncertainty will be all over the place, in return, Gold is likely to keep on rising.

Any Possible Retracement?

Of course, if we look at the technical charts, whether for Gold or Silver, they are heavily overbought and flat at the same time, which keeps the possibility for further gains ahead.

Yet, the last thing you need to do is to start buying Gold at the current levels. If you haven’t bought Gold at a level below 1250, then don’t do this now.

In the meantime, any downside retracement is likely to remain limited above the recent breakout whether around 1280 and of 1260.

As for Silver, the downside retracement may remain limited above the recent support area around $17.

Targets?

On a very short term, Gold tested its yearly high during yesterday’s trading, but so far there is no clear breakout above that resistance. This is normal ahead of some political risk.

Yet, a break above $1295 would probably keep the door open for further gains, probably above 1300, which should be watched carefully, as a break above 1300 with a weekly close above that resistance would renew the strongly bullish outlook once again.

As for Silver, despite the fact that Silver regained above its entire Moving Averages including 50, 100 and 200 DAY MA’s, Silver still needs to prove itself in the coming days/weeks as I would like to see a regain above the broken uptrend line to renew the bullish outlook in the longer term.

The next possible resistance stands at 17.70 followed by 18.0 where sellers are likely to appear but should be watched very closely for a possible breakout.

Disclaimer: All information provided is an opinion and is for informational purposes only.  It is not intended to be an investment advice.

 
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.