Analysis: Silver & Gold

Gold and Silver - the ancient set of currency commodities -  metals which many considered a form of money, and are often talked about by both sides of the spectrum. Endless banter about these two, and if a move happens before the holidays - the news is set for the next few months. The point in this post is to show the daily settle price of Gold and Silver for reference, and to present the thought that Silver and Gold may both drop. 

Gold has been on a stride since before the (English speaking) new year. No doubt bolstered by fear from geopolitical risks to inflation. Since 2000 I have watched the price of Gold skyrocket without much remorse or any sprinkle of a reversion to the mean. This was caused by numerous events - financial and political - and over time we had a rise in Silver.  Silver peaked May 02, 2011 at $46.08 per troy ounce. I am bearish on Silver and a tad bearish on Gold, despite believing the prices will remain within 5-10% of current value for the next...the next while...

Gold prices were volatile in recent weeks, weighed on by both upward and downward price pressures. On 9 February, gold closed the trading day at USD 1,313 per troy ounce, which was up 0.1% from the same day of January. The price was up 6.4% from the same day last year and was 0.8% higher on a year-to-date basis. Gold prices have risen in recent months, largely due to a weak U.S. dollar. Putting upward pressure on prices was a large sell-off in the U.S. stock market, which supported safe-haven demand for gold. On 5 February, U.S. stock markets recorded the worst trading day over six years. In addition, strong jewelry demand from India is adding upward pressure, along with a highly uncertain global backdrop. Moreover, recent data revealed that mine production fell in the fi rst nine months of 2017, in part due to output cuts in China amid environmental concerns. Meanwhile, an expected tightening in global interest rates is limiting gold’s gains. Bank of England Deputy Governor Ben Broadbent commented in February that interest rates could be raised sooner than previously expected and at a quicker pace. FocusEconomics analysts see gold prices receding slightly in the coming quarters but regaining ground in 2019. The global geopolitical climate should continue to support demand for gold; however, monetary policy tightening will weigh on the asset’s appeal. FocusEconomics analysts see the price of gold averaging USD 1,284 per troy ounce in the fourth quarter of 2018. In 2019, gold prices are projected to rise steadily throughout the year and average USD 1,334 per troy ounce in Q4. This month, most of our analysts left their projections unchanged. 14 forecasters made no changes to their projections for Q4 2018. However, 9 analysts raised their forecasts, while 2 analysts cut their forecasts. The bulk of our panel sees prices ending the year at a lower level. Some analysts, however, have a more bullish view, and the maximum forecast is for gold to average USD 1,460 per troy ounce in Q4 2018. At the opposite end of the spectrum, the minimum forecast is USD 1,100 per troy ounce.

Silver prices lost ground at the beginning of February following a rise in January, as supply came in above demand. The recent price drop came despite higher investor demand for the precious metal amid a big sell-off in U.S. stock markets. On 9 February, silver closed the trading day at USD 16.3 per troy ounce, which was 4.2% lower than on the same day in January. The price was down 4.5% on a year-to-date basis and was 8.2% lower than on the same day in 2017. A growing supply of the precious metal ha s led to a supply surplus and downward price pressures. These have more than off set upward price pressures stemming from the recent plunge in the U.S. stock market, which recorded the worst trading day in over six years on 5 February, ramping up investor appetite to hold the safe-haven metal. Price gains have also been limited due to expectations of a hike in global interest rates. Leading the course on tightening monetary policy, the U.S. Federal Reserve is expected to raise rates two to three times this year, and the Bank of England also recently signaled sooner and more aggressive rate hikes to come. Prices are expected to gain ground as supply and demand dynamics become more favorable on recovering industrial and investor demand, and more limited supply. However, geopolitical tensions will continue to propel upside risks. FocusEconomics Consensus Forecast panelists expect prices to rise moderately this year, averaging USD 17.3 per troy ounce in Q4 2018. The panel sees silver prices rising further in 2019, to an average of USD 18.5 per troy ounce in Q4. The majority of our panelists held their forecasts for Q4 2018 steady from last month: 10 analysts made no changes to their projections. Meanwhile, 5 panelists raised their projections, and 4 revised down their forecasts. There was a divergence in panelists’ views: The maximum price forecast for Q4 2018 was USD 20.1 per troy ounce, while the minimum projected price was USD 15.3 per troy ounce.