Precious Metals: Bullish Outlook is Here to Stay

Jun 20, 4:41 pm
precious metals

Metals have been declining for the past two weeks after Gold and Silver failed to stabilize near this year’s high. Gold lost more than $40 in the last 10 trading days, while Silver is now trading below 16.50.

The notable decline in metals came due to many factors, fundamentally and technically, while both remain bullish. However, Gold is likely to outperform Silver.

Bullish Outlook Is Here To Stay

Since the beginning of the year, metals have been rising due to many factors, including politics, geopolitical tension across the board, high risk of the far-left parties in Europe and finally the US Dollar's notable slide to the beginning of the year lows.

However, the risk of the far-left parties in Europe has eased significantly, especially after the French presidential election, while the UK general election came in with a surprise (hung parliament), despite the fact that the public polls were estimating a lead for the Conservatives.

Such ease has played a role in Metals decline. Yet, the key risk is still here, which are the political and the geopolitical tensions.

Since the beginning of the new administration in the US, geopolitical tensions spiked higher, whether between the US and Europe, or Russia and most importantly North Korea. In addition to that, the tensions are rising fast between Qatar and many of the Arab countries.

All these factors are playing a significant role in metals trends. Will they stop? Not anytime soon, and that keeps the possibility for further gains in metals over the coming months.

Gold Nearing Demand Zone

Gold eased back from this year’s high around 1295 all the way back to 1240’s until this report is released, breaking throughme key support area: the 1260’s.

Gold continued its decline at the beginning of this week and broke through its 100 DAY MA as well, which cleared the way for further declines.

However, the chart is suggesting that Gold is getting ready for another bounce as it is approaching a notable support area around 1237, as it represents its 200 DAY MA, former support area in addition to that, its confluence by the daily trendline of this year.

Yet, a stabilization above that level is needed, where buyers are likely to appear. A break of which would deepen the current slide, probably toward 1220’s.

The bullish outlook remains unchanged as long as Gold continues to trade above the former bottom around 1215 and/or as long as it stays above 1200.

Silver At Risk

It's clear; Silver has failed to prove itself over the past two weeks. We were hoping that Silver breaks above $18 in the past two weeks.

However, Silver made it through its entire moving averages for a very short period of time, before declining all the way back to 16.40’s earlier this week.

This would bring us to a conclusion that the recent rally from $16 to 17.80’s was just a short-term retracement, as it dropped back from its 61.8% Fibo.

In the meantime, 16.40 and 16.20 are the next key levels to keep an eye on, as a break of which would put Silver at risk to decline further, with a possibility to test this year’s low.

Otherwise, the longer-term view remains bullish as long as it stays above $14 for now.

However, the technical indicators are giving us some hope, as they are heavily oversold on most time frames, which should be watched carefully.

Another upside retracement is highly possible in the coming days, but we need to look for the catalyst.

 
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.