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(Bloomberg) — Investors continue to pile into gold as prices advanced for a fifth day, moving ever closer to the all-time high reached in 2011. A weaker dollar, negative real rates, worries over the economic cost of the pandemic and flaring political tensions have both gold and silver heading for their biggest annual gain in a decade. Silver, which rallied 20% over the previous four days before
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As liquidity stemming from monetary and fiscal policy remains rife, cross-asset correlations are elevated, most notably this has been evidenced by the continued strong relationship between equity and FX markets. As market volatility drifts lower, high beta currencies have taken its cue from the pick-up in equities, which has largely come to the detriment of the US Dollar. As we highlighted yesterday, the negative relationship between the US Dollar and stocks is its strongest in several years. Put simply, the longer equity markets edge higher, the longer the downtrend in the greenback.
Silver made another attempt to gain momentum above $23.00 but faced resistance at $23.25 and pulled back as the U.S. dollar started to rebound against a broad basket of currencies while gold gained some ground in continuation of current upside momentum.
The U.S. Dollar Index has found support near March lows and is trying to settle above the 95 level. The U.S. Dollar Index has declined from 97.5 to 95 without any material rebound attempt. This move has provided significant support to silver as weaker dollar makes it cheaper for buyers who have other currencies.
In case the U.S. Dollar Index manages to stay above 95 and starts to rebound, silver may experience some pressure.
Gold continues its rally and has recently traded as high as $1888 on a spot basis before pulling back closer to $1870. Just like in silver’s case, gold’s RSI is in the overbought territory, and the risk of correction is elevated.
Commerzbank technical analysis on gold is looking for it towards $2000:
Support is offered by the 55-day ma at 1797
Three elements cause physical delivery on the COMEX to have reached record highs this year: strong demand for futures in New York, a persisting spread between the price of futures in New York versus spot gold in London, and arbitrage. Read More