Price of Gold Fundamental Daily Forecast – Supported by Silver Surge; Capped by Stronger US Dollar

Gold futures are trading higher, but inside Friday’s range as investors piggy-back strong gains in the silver market. Gold’s gains are likely being limited by a new one-week high in the U.S. Dollar. A rising dollar tends to limit foreign demand for the dollar-denominated gold.

Gold has been essentially rangebound for weeks as investors waited for developments around a U.S. stimulus package, although the precious metal did post a weekly and monthly decline hurt by a stronger U.S. Dollar.

At 11:38 GMT, April Comex gold is trading $1862.70, up $12.40 or +0.67%.

Silver Prices Jump 11%, the Most in 11 Years as Reddit Traders Try Their Squeeze Play with the Metal

Futures contracts for silver surged higher early Monday morning as the Reddit-fueled boom in highly shorted stocks appears to be spilling over into the metals market.

Spot silver prices jumped 10.9% to $29.27 an ounce at around 11:19 GMT. If this holds, it would be the biggest one-day pop in silver on NYMEX since a 13% spike in March 2009. The metal briefly hit $30.03 to register its highest level since February 2013 before paring some of its gains.

The sharp move higher reflected the biggest move for silver futures since at least 2013 and extended gains for silver and silver-related equities late last week.

Gold’s relatively subdued performance suggests that silver’s rally may not last long. An ounce of gold currently buys 63.5 ounces of silver, compared to 73.3 ounces on January 25.

“Given the gold-silver ratio is at a multi-year low, we see limited room for further outperformance of silver,” said Soni Kumari, commodity strategist with ANZ.

Commerzbank analyst Eugen Weinberg said in a note that in the medium term, any excessive price rise is harmful for silver as it can damage physical demand.

Gold Traders Watching Stimulus Developments in Washington

A group of 10 Republican senators sent President Joe Biden a letter on Sunday, urging him to consider a smaller, scaled-down COVID-19 relief proposal. His current proposal comes after House Speaker Nancy Pelosi said the chamber will move to pass a budget resolution, the first step toward approving legislation through reconciliation. The process would enable Senate Democrats to approve an aid measure without GOP votes.

Daily Forecast

The fundamentals are not especially bullish for gold with the U.S. Dollar showing strength and Democrats and Republicans still far apart on approving more stimulus, but that doesn’t mean the momentum driving the silver market can’t spillover into gold. Traders should be prepared for heightened volatility and the possibility of a whipsaw trade, similar to the price action on Friday.

The current set-up on the daily chart suggests $1878.90 is a potential breakout area with $1894.10 to $1911.20 a reasonable upside target. Speculative buyers could try to run buy stops over $1878.90.

For a look at all of today’s economic events, check out our economic calendar.