Gold and Silver Will Shine Again

Global Gold ETF has witnessed a severe loss in February which was the second largest loss since March 2020 and the seventh all-time-loss. The total amount of Gold’s ETF losses is approximately $207 bn, or 87.4 tonnes, whereas North America was the largest seller selling $4.1 bn.

Source: goldhub

The result of this sell-off was reflected on Golds price as a monthly 6.16% drop, heaviest since 2017. Economic recovery and a defeat of Covid-19 played key roles in switching investors’ interest from the “safe-haven” Gold towards other assets. However, the faster recovery signalled a fear of inflation, and “Gold” and “Silver” are well-known hedge assets against inflation.

The spread between the CFTC Gold total short and long gets tighter, the gap between the total percent of open interest is now only 5.1. CFTC Non-reportable long positions outperform short positions by 2x. The overall changes in total net positions since the last week displays that Gold’s bullish better number is increasing.

In March 2021, after the February sell-off, Gold rebounded from a dynamic support as seen on the daily XAU/USD chart below.

The support worked well as the precious metal started gaining, however the uptrend continuation was halted at $1756, when the US Dollar Index was surging. The $1756 resistance sent XAU/USD back to the March support at $1680 where Gold rebounded with a higher pace. This recovery caused Gold to form a “double bottom” pattern, which signals the trend reversal. MACD and RSI indicators are bullish on Gold, whereas Moving averages still act as resistance.

Despite the bullish outlook of Gold on a daily chart, Gold still has to close above $1756 to continue upwards. If the breakout from the $1756 is confirmed, Gold will continue the uptrend up to $1814 and $1868.

Silver is set to outperform Gold, although the gap between the CFTC long and short positions is higher.

Silver is a cheaper “safe haven” asset than gold and attracts investors by its more affordable price and historically moves alongside gold, while sometimes outperforming the yellow metal in gains and losses. While March ended with a 1.45% loss for Gold, silver had a 8.52% loss.

Silver has touched it’s support level later than Gold, though was able to get back to it’s ascending parallel channel.

As seen on a daily XAG/USD chart above, the bullish run of Silver was stopped when the price hit the upper edge of the “Descending ending diagonal or “Wedge” pattern. As the space in this wedge gets tighter for the price, it is expected that the price will break out from this wedge very soon.

According to the rules of this formation, this corrective-wave pattern consists of a 5-wave structure, as seen on the chart. Based on this rule, we can say that Silver has completed its correction, is tired of being inside this wedge and is about to start a new uptrend impulse.

An hourly XAG/USD suggests that Silver is currently bullish and should reach at least $26.40 when breaks above $25.30, and $27 when breaks above $26.40.

Not only the peaking inflation fear might support the uptrend of these two “safe haven” assets but the Wave 3 and 4 of Covid19 pandemic. The number of new cases is rising dramatically again, making a curve in new cases Worldwide.

Many countries question the effectiveness of vaccines and there are so many reports that vaccines had an absolutely negative effect and even were lethal for some patients. Positive economic data brings in an inflation fear and the growing Covid-19 cases principles the fear of new Covid-19 waves, if there was any fear in the market then “safe-haven” asset has always been a choice.