Market News & Analysis


Top Story

Precious Metals Update: Silver Breaking Out

While gold continues to frustrate the bulls and the bears alike, with its ongoing consolidation and false break out and break down attempts, silver is taking its lead from copper and palladium as it tries to break higher today.

Gold has been held back by the recent rally in the equity markets and sell-off in bonds, reducing the appeal of the safe-haven metal – even if its longer-term bullish price structure points to potentially higher prices eventually.

Silver, on the other, has benefited more from the positive sentiment towards risk. The white metal tends to be less prone to a sell-off when stocks rise than gold is, given that as well as a precious metal it has many industrial uses. At the same time, the fact that it is still viewed as a safe-haven metal means it could go up along with gold in the event of a risk-off period in the stock markets.

But more to the point, there are at least four reasons why we are turning bullish on silver. Let’s go through each in turn:

  1. With the Dollar Index falling for three consecutive weeks, thanks mainly to the euro and pound rallying on Brexit optimism, the dollar-denominated precious metal could rise further – especially if the dollar’s weakness is accompanied by a sell-off in stock markets.
  2. Meanwhile, judging by the rally in equity markets and the recent rebound in commodity dollars and copper, investors are apparently becoming more confident that the US and China will soon be able to strike a trade deal after agreeing to a partial arrangement the week before. If so, demand for silver in its physical form should, in theory, rise as manufacturing activity rebounds.
  3. The gold/silver ratio has continued to trend lower after topping out last year near historic highs around 93.35. At 84.10ish, the ratio is now back below the high from last year (at 86.54), thus suggesting this year’s earlier breakout attempt was a false move. In other words, silver is outperforming gold at the moment which makes it a better long candidate or a worse short candidate over gold.
  4. In addition, and more significantly, this morning saw silver poke above its consolidative trend line plotted from connecting the recent lower highs. If the breakout is sustained and we close above resistance and last year’s high at $17.70, then this could lead to further technical buying in the days ahead.
So, the potential is there for silver to rally over the coming days. But first thing is first, it needs to hold today’s breakout attempt above its trend. 

Source: eSignal and FOREX.com.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.