In today’s fast-paced world, most folks want news and analysis that cuts out the fat and gets straight to the point. So here goes my two-minute bull and bear cases, at present, for the gold (GCJ26) and silver (SIK26) markets.
Bull Case for Gold and Silver
- Geopolitics are fully bullish for the safe-haven metals. The Middle East war is playing out and it’s very likely there are still some surprising developments lurking around the corner.
- The longer-term technical postures for gold and silver remain significantly bullish. Both markets have seen their near-term chart postures also improve over the past few weeks. This will continue to invite the chart-based speculators to the long side.
- Crude oil (CLJ26) prices spiked this week but are still trending higher amid serious global supply concerns. That’s a bullish “outside-market” element for gold and silver.
- The U.S. stock indexes have seen their price uptrends stall out and trading has turned wobbly, amid elevated trader and investor risk aversion. That’s a positive for the safe-haven metals, from a competing asset class perspective.
- Investor and commercial demand for silver, and investor and central bank demand for gold, remains solid.
- The moves by major economies to stockpile rare-earth minerals continue to support the gold and silver markets — and especially silver.
Bear Case for Gold and Silver
The war in Iran, arguably the biggest and potentially most destabilizing geopolitical event in decades, has not significantly moved the needle on gold and silver prices. When a market cannot rally on fresh, bullish fundamental news (like the Iran war for metals), then that’s a sign the bulls are exhausted and the major markets have run their course.
The surging U.S. dollar index ($DXY) that hit a more-than-3.5-month high this week is a bearish outside-market element for the two precious metals.
U.S. Treasury yields are on the rise due to inflation concerns.
The inflation worries have prompted the marketplace to dial back U.S. interest-rate-cut expectations. Same goes for other major central banks such as the European Central Bank and the Bank of England.
Buying gold and silver is “a crowded trade.” It’s likely the smart money has taken its profits in the metals and has moved on to seek out profits in markets that are not in very mature bull runs.
The Middle East war is especially upsetting to Asian markets and economies. This suggests less consumer and commercial demand for gold and silver coming out of major importers India and China, for use in jewelry for their consumers.
My Bias: Neutral Metals, Bullish Grains
At present, I don’t have a strong overall near-term bullish or bearish bias on gold and silver prices. That may suggest more choppy and sideways trading in the coming weeks.
Importantly, however, it is my bias that speculator and institutional (hedge fund) monies are moving into the grain markets. Since the beginning of this year, the grain markets have been trending higher. Grain futures prices are not anywhere near their record highs, which means that in today’s environment of inflation worries and the hoarding of some raw commodities by industrialized countries, the grains look attractive to speculative traders and even long-term investors.
Tell me what you think. Send me an email at jim@jimwyckoff.com. I enjoy hearing from all my valued Barchart readers all over the world and try to respond to every email I receive.
On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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