What is our trading focus?
Spot Gold (Ticker: XAUUSD)
Spot Silver (Ticker: XAGUSD)
Gold/silver ratio (Ticker: XAUXAG
HG Copper (Ticker: COPPERUSJUL21)
Gold’s six week rally continues and during the past couple of days it has broken a couple of key levels, most noticeable the 200-day moving average and the downtrend from the August 2020 high. It is however also worth noting that since March when the month long slide culminated in a double bottom at $1677/oz, gold has on a number of occasion had silver to thank for being able to penetrate key resistance levels. The most critical being the break above $1800 and yesterday’s rally above the mentioned downtrend.
Silver has since the early April low outperformed gold by 7% with the gold-silver ratio falling from above 70 ounces of silver to one ounce of gold to the current 65.50. Some of that additional support for silver deriving from its industrial link to surging industrial metals such as copper and zinc.
The current rally is being supported by multiple developments with the most important being a weaker dollar and stable US Treasury yields. The latter hiding the fact that rising inflation concerns have seen the 10-year breakeven yield reach an eight year high at 2.56% while the real yield with its often strong inverted correlation to gold has slumped back down towards -1%. In addition to this we have Asian virus woes, Middle East tensions and very high crypto volatility denting this novice sectors store-of-value credentials.
For the rally to extend beyond current levels, U.S. economic data needs to continue the recent downward trajectory. While not reducing gold supportive inflation pressures a corrective period of the U.S. data cycle should continue to hold down U.S. Treasury yields while adding downward pressure on the dollar.