by Alasdair Macleod, GoldMoney:
Gold and silver rallied in a quiet week which straddled the year-end. Gold rose $11 by morning trade in Europe from last Friday’s close to $1292, and silver by 30 cents to $15.70 over the same time frame.
This week’s move continues a powerful rally, partly driven by bears closing short positions in a squeeze from mid-November onwards. Silver, which underperformed gold in 2018, has rallied even more strongly in percentage terms, up 12.2% since its mid-November low, while gold is up 7.7%. With a gold/silver ratio of 82.9 compared with 76.9 at this time last year, silver still has ground to make up.
In the absence of Commitment of Traders Reports (they are suspended due to the US Government shutdown) it is hard to judge whether precious metals are still oversold, However, other indicators, such as open interest on Comex, suggest we are back to neutral.
The next chart is of gold and its open interest.
More importantly, the two moving averages are moving towards a golden cross, which will be seen by technicians as a bullish development. Putting these considerations to one side, a pause for breath, particularly if it leads to a minor decline in open interest, would be bullish, lending support for the next challenge, an assault on the $1360 level.
The more positive tone for precious metals has led to comments about their safe-haven status. When the amateur crowd starts talking in this tone, it is indicative of frothiness, so from that point of view the market is becoming emotional rather than rational.
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