The US Dollar tumbled to the lowest level since May 2016, completing five months of consecutive declines, something we haven’t seen since 2011.
Despite this move and the notable decline in USD Index, Metals volatility was muted. Gold advanced slightly, while Silver managed to rise close to 1%.
Even though Metals are still lagging, the opportunity is still there, as the signs of stabilization since the beginning of the year are getting stronger.
Demand Remains Strong
Looking at the latest fundamentals including CFTC commitment of traders report and the last known ETF holdings of Silver and Gold, we can see that the demand is still there.
However, retail traders probably got tricked by the latest decline in Gold, as CFTC Non-Commercial Shorts spiked to the highest level since 2015, while longs eased back to the lowest level of this year.
At the same time, the Last Known ETF Holdings of Gold stabilized for the second month in a row around 53M ounces, which means that institutional investors’ estimates are still positive, as there are no liquidation signs as of yet.
The same story applies for Silver. However, Silver CFTC data showed a panic selling during July after Silver’s flash crash to $14, which might be due to stops orders or hedging when Silver crashed.
At the same time, Silver longs decreased below 100K but stabilized around that level for the past three weeks, which might be the beginning of another wave of buying soon.
Gold Supported Above 1250
Gold managed to break above its entire moving average last week, with a clear weekly close above its 1260 resistance area, which was the 61.8% Fibo of the latest decline.
In the meantime, Gold has been trading around $1270 since yesterday, despite the US Dollar weakness. Such move gives us some clues that a retracement is needed, especially that the technical indicators are heavily overbought on most time frames.
Yet, any downside retracement is likely to remain above the 50 and 100 DAY MA where both stand around 1250. A break through that level would mean a deeper decline back to 1240. However, the outlook remains bullish as long as Gold continues to trade above $1200.
On the upside view, the first immediate resistance stands at 1270 followed by 1280, which should be watched carefully, as a break above those levels should clear the way for further gains, probably toward 1290 and this year’s high, which should be watched very carefully.
This year’s high is considered as a key for the next trend, whether it breaks sharply higher, or another leg lower would be more likely.
Silver Around Its Trend Line
Silver has been rising for the past three weeks in a row, right after its flash crash at the beginning of July, reaching another key resistance.
Yesterday, Silver outperformed gold by rising close to 1%, while Gold closed yesterday’s trading almost unchanged.
In the meantime, we are keeping a close eye on $16.80, which represents Silver’s down trend line resistance, which should be watched carefully, as this might be the cross road of silver in the coming days.
Technical Indicators are suggesting a possible retracement to the downside. However, if Silver is strong enough; the retracement is likely to be limited above $16.
On the upside view, a break above that 16.80’s is likely to clear the way for further gains toward $17.0 this week or later next week, while a break above that resistance would give us more signs that Silver is ready to test 17.70 and above.
