Market Overview

Silver and palladium broke up. Will gold follow?

The precious metals are recapturing critical levels one after another, claiming a reversal to the upside after a two-year bearish trend. Silver made quite a move up on Monday, gaining over 4%. Palladium closed the day up 5.3%, and at one point, it was up 6%.

Silver managed to break above the 50-day moving average, which used to be an effective resistance since the beginning of the month and made a six-week high. More positive vibes for investors are likely to come from a quick return above $20.

At current levels near $20.60, silver has approached the support area of May, which could now move into resistance. If the bulls don’t fight back sufficiently here, the price could jump quite quickly to $22, the area of the rebound highs of June. This is already the critical turning point in the last eight years, where a battle between long-term investors with opposing views is about to occur.

Palladium rose on Monday to $2250, the high since May, developing the uptrend of the last two months. Confident buying pushed palladium above the 200-day average yesterday, although sellers have stepped near it over the past four months. This looks like a fundamental change for long-term investors in confirmation of the upward trend since June.

So far, silver and palladium are now showing more bullish signals, while gold remains anchored at the 50-day moving average and below the local lows of May and June. However, gold is often in slightly earlier stages of market cycles as a more liquid instrument.

Other positive leading signals for the precious metals market in general and gold include a 15% increase in VanEck Junior Miners fund price since the middle of last month and a 10% jump in Barrick Gold since the end of July with a 4% accord on Monday.

The performance of silver, palladium, and gold miners points to a reversal of the two-year negative market trend. However, while it occurs in relatively narrow sections of the market, gold still should prove to steady growth of investors’ demand.

A necessary confirmation of the trend reversal in gold will be a return to the area above $1800 and a continuation of bullish momentum at these levels.

The FxPro Analyst Team

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