*Biggest monthly drop since 2011 as gold and equities succumb to the strength of the dollar
*ETF have registered their biggest monthly outflow so far in almost six years
Gold fell 4.6% last week, while silver slumped 15%. A price floor is expected when further selling the price down cause’s scarcity (demand drops and so does the equilibrium price). Which hasn’t happened yet? But we have some additional thoughts to share, so stay tuned. Gold and silver posted their biggest weekly losses since March, when the global onset of the coronavirus pandemic panicked markets.
Silver's biggest monthly price drop in 9 years suggests the market's love affair with it is over. Silver is on track for a 25% fall in September, its biggest monthly drop since 2011, as gold and equities succumb to the strength of the dollar. Exchange-traded funds have registered their biggest monthly outflow so far in almost six years.
If gold's on the back foot and the economic outlook is mournful (tick both) then silver remembers it's actually an industrial metal and goes into a tantrum. December Comex silver was last down at $22.98 an ounce. Both have succumbed to belated long liquidation and pressure generated by the strength in the general dollar index, which is on track for its biggest weekly gain in almost six months.
A line-up of Federal Reserve officials have said the central bank alone can’t boost prices and the economy would falter without more aid. Gold silver has fallen more steeply of late than currency exchange-rate developments would have led one to expect. Gold silver’s slump could prove temporary with increased uncertainty over the US presidential election. Any added conflict in the run-up to the vote should help lift the precious metal.
There is no new financial stimulus package for Americans in sight. Throw in the element of the high potential for a disputed and even protracted U.S. presidential election result (President Trump said Wednesday the presidential election in November will likely be decided by the Supreme Court), and all of the above should favor trader/investor demand safe-haven assets like gold, silver, the US dollar and US Treasuries.
Yet, many longtime market watchers are presently scratching their heads that only the greenback is benefiting at present, while gold and silver are taking a beating and US Treasuries languish. Meantime, the yield on the US Treasury 10-year note is trading around 0.67% today.
December silver futures bulls have lost their overall near-term technical advantage last week as prices are now trending down on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at Tuesday’s high of $24.62. The next downside price objective for the bears is closing prices below solid support at $20.
(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 28-9-2020