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The Case for Why the PMs Rally Isn't Over Yet

February 21, 2020, 5:55 AM Przemysław Radomski , CFA

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Some things that we outlined previously, happened yesterday or in today's pre-market session (gold moved to $1,630, and gold miners moved to their January high) and some things didn't take place (silver didn't move to its January high) - at least not yet. So, is the top in the PM sector in?

It might be already in as far as mining stocks are concerned, but it's unlikely to be in as far as silver is concerned. And in case of gold it's relatively unclear, but closer to being in than most people think.

USDX Status

First of all, the USD Index doesn't seem to have topped or corrected yet, but since it moved very close to 100 level (just 0.18 below it), it might have already topped. Whether this is the case or not (and it's not clear), it is clear that the USD Index has not yet bottomed. This means that the force that could push the PMs higher in the short run remains intact.

PMs Yesterday

Miners should be lagging gold before the top and silver should be outperforming gold. Miners have definitely underperformed gold yesterday by reversing despite a higher close in gold. Their reversal is also a topping sign on its own.

However, we should also see silver outperform gold at the very end of the move up and that didn't happen yesterday. Consequently, it seems that we will get another move higher - perhaps later today or early next week - when PMs would move higher and during this move silver would rise with more verve.

It would be a great bearish confirmation if miners showed weakness during the above-mentioned move higher - perhaps by once again testing the previous high, and once again failing to break above it on a closing-price basis.

Thank you for reading today's free analysis. If you'd like to supplement the above with details regarding our current approach to trading positions (and the upcoming ones), we encourage you to subscribe to our Gold & Silver Trading Alerts today. Naturally, as our subscriber, you'd be notified as soon as we see the confirmation that the top in the precious metals sector is in.

Thank you.

Przemyslaw Radomski, CFA
Editor-in-chief, Gold & Silver Fund Manager

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Feb Market Overview

Gold Market Overview

Last month, we laid out our gold outlook for 2020. In the February edition of the Market Overview, we update our fundamental analysis to incorporate the latest data, in particular those about the US fiscal policy. As the bipartisan consensus is that deficits don't matter, the perspective for gold this year could be better than we previously thought. Second, we look beyond 2020 and sketch the fundamental trends that will likely shape the global economy and the gold market through the whole 2020s.

Moreover, we will analyze two important recent developments. The first one will be the 2019 repo crisis and the following Fed's intervention in this market. Second, the Riksbank has ended recently its experiment with negative interest rates. What does it all imply for the gold market? We invite you to read our Gold Market Overview and find out!

Read more in the latest Market Overview report.

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