In this publication: Gold prices broke below USD 1,300 per ounce and silver prices below their August low. The 200-day moving averages for gold and silver prices come in at USD 1,257 and USD 17.09 per ounce respectively. A break below these levels would mean that the uptrend is over161004-Precious-metals-watch-gates-were-opened.pdf (211 KB)
The bottom fell out under gold prices
Over the past few months, gold and silver prices failed to move higher. This resulted in disappointment among investors. When the developments around Deutsche Bank failed to push gold prices higher, investor became really nervous. In this environment, hawkish Fed comments from Mester and Lacker, some better US economic data releases and constructive sentiment on equity markets all weighed on gold and silver prices and pushed them to the lower border of their respective ranges. When the pressure became too high, the bottom fell out under gold prices. When gold prices broke the USD 1,300 per ounce level, position liquidation resulted in a substantial intra-day price fall. Gold prices lost around 2% on Tuesday while silver prices dropped by close to 3%. Is the worst behind us? We don’t think so. If US economic data, including the US employment report on Friday, came in better than expected expectations for a Fed rate hike this year and next year will increase, leading to a higher US dollar and lower gold and silver prices. This means that the downside in gold and silver prices has further to go in the near-term. However, we expect the long-term uptrends to remain in place. This means that gold prices need to bottom out around USD 1,257 per ounce and silver prices around USD 17.10 per ounce, where the 200-day moving average comes in. If gold and silver prices break below these levels, this year’s uptrend is over.