Last week, Gold and Silver continued to rise further and broke above key resistance areas easily, unlike what was expected. Estimates last week showed that both metals would experience a strong resistance. However, they both managed to break higher posting the highest levels of this year.
Uncertainty?
There are a lot of talks about the global uncertainty, is it true that uncertainty is the leading factor of this rally? There are many factors involved, but it’s not only uncertainty.
The biggest uncertainty comes from Europe and the US. In Europe, eyes are on France as the elections are around the corner and concerns are rising that the far right party might win the election.
If so, this would lead to extreme scenarios, including France leaving the European Union, similar to what happened in Europe. The party is campaigning to leave the European Union and to get back to its own national currency. If this happens, it would be Armageddon for the European Union.
Is It Only Uncertainty?
Of course, not, there are many factors involved as noted before. One of these factors is global inflation. For the past few months, inflation data has proved that inflation is rising faster than expected.
Such increase in inflation is a positive factor for Gold and Silver as they are considered as a hedge against inflation. Estimates are also rising for a faster inflation in the coming months, which keeps the positive outlook higher for both metals.
Any Other Factors?
Yes, the global demand is also rising gradually, especially since the beginning of this year. By looking at the last known ETF holdings of Gold and Silver, we can spot the following.
Gold ETF holding increased for five consecutive weeks, rising from 52.9M Oz in January to 54.7M Oz by the end of this month. This is the highest reading since the beginning of December of last year.
As for the CFTC data, Gold COT charts showed a slight increase in Gold non-commercial longs since the beginning of the year, while the shorts are trading around 100K, which is the lowest since November of last year.
As for Silver ETF holdings, its also rising since November of last year, reaching a record of 637.3M Oz in December of last year and remains around that record since then.
However, Silver CFTC data showed a notable increase in Silver Non-Commercial longs to the highest level since September of last year, which is also near its record high, while shorts are declining gradually every week.
What’s Next?
Gold managed to close last week’s trading well above 1250 resistance area, which is seen as a clear break above that resistance, reaching as high as 1260. However, it manage to retreat a little bit at the beginning of this week.
Yet, the technical indicators are solid and positive, which opens the way for further gains ahead, possibly toward 1270 later this week, which should be watched very carefully as it represents its 200 DAY MA on the daily chart. A break of which would lead to an extension of the current uptrend.
Silver has the same story, but Silver is trading above its entire Moving Averages since last week, outperforming gold since the beginning of the year and closed last week above 18 for the first time this year.
The technical indicators are also positive but slightly overbought, which suggests a possible retracement ahead. Yet, the possibility to test 18.60 resistance area remains possible before the expected retracement.
On the downside view, the possible retracement is likely to remain limited for the time being above the former resistance which stands at 18.00
