Gold and silver rallies extend further Gold and silver rallies extend further Gold and silver rallies extend further

Gold and silver rallies extend further

Ole Hansen

Head of Commodity Strategy

Summary:  Gold continues its impressive rally and yesterday it broke back above $1600/oz to reach the highest close since 2013. The recent move has been particular impressive occurring at time when the dollar has been breaking higher against several major currencies. In this update we take a look at why gold remains in demand despite the apparent headwinds.

Gold continues its impressive rally and yesterday it broke back above $1600/oz to reach the highest close since 2013. The recent move has been particular impressive occurring at time when the dollar has been breaking higher against several major currencies. The dollar strength has been particular noticeable against the euro which has dropped to a near 3-year low and in the process gold priced in euros has rallied to a fresh record high at €1490/oz.


The rally has also occurred despite reduced COVID19 fears with the market right or wrongly increasingly adopting a belief that it will primarily be a Q1 event. This on the assumption central banks and governments will do whatever it takes to support a return to trend growth later this year.


So why is gold in demand when other markets are doing better and the dollar is rising? We believe that the combination of additional rate cuts, increased stimulus, negative US real yields and U.S. stocks back to record levels will continue to drive strategic diversification and safe haven demand. Adding to this the potential risk that the virus outbreak may have a longer than expected impact.


January was a particular worrying months for the markets with U.S.-Iran tensions being followed by the virus outbreak. During January total holdings in Exchange-traded funds backed by bullion rose by an average of 1.3 tons/day. So far this February holdings have, despite the mentioned dollar strength and recovering markets, been rising by 1.9 tons/day.

Gold has extended its rally today and reached the January top at $1611/oz. With the metal moving higher, despite the mentioned headwinds from other markets, it is difficult to see what at this stage can halt or pause the rally. Silver which suffered a deeper correction than gold last year has benefited from the ongoing focus on precious metals. Over half of silver demand comes from industrial applications and this is the main reason why it has struggled amid worries about the virus impact on global growth.

However with a lighter position than gold the continued rally has once again helped attract interest from traders looking for relative value. After finding support at $17.50/oz it has spent the past five days outperforming gold with the gold-silver ratio dropping back towards 87 (ounces of silver to one ounce of gold).

Silver may find some resistance ahead of $18.60/oz (dotted line) while gold, for lack of clear technical levels, could be heading towards the next round number at $1650/oz. However having reached resistance at $1611/oz it may pause first in order to gauge the level of support at these higher levels. A small correction could see it test the recent high at $1590/oz.

Source: Saxo Bank

While total ETF holdings continue to reach new record highs hedge funds have maintained a net-long between 200,000 and 300,000 lots since last October. The latest breakout is likely to attract fresh momentum buying which will be added to the 229,369 lots (22.9 million ounces) they held during the latest reporting week to February 11. The speculative long in silver is significantly lower than gold and at 56,011 lots there is still some room to go before reaching the 2017 record at 99,000 lots.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.