Gold (XAU/USD) and Silver (XAG/USD) Forecast: Bullish
- Gold demand remains high in China despite the PBoC pulling back somewhat
- Gold poised for a retest of the all-time high with the RSI yet to breach overbought levels
- ‘Silver squeeze’ narrative returns on the back of a meme stock resurgence
- The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
Chinese Demand for Gold Increases Despite PBoC Drop-off in Purchases
Gold demand rose in April after Chinese ETFs recorded the strongest month on record, pushing the total assets under management to a historical high of $6.4 billion to reach five consecutive months of inflows.
Central banks have also steadily added to gold holdings, with the Peoples’ Bank of China (PBoC) very active in this regard until April. Last month, the PBoC recorded its slowest rise of gold purchases since it resumed announcements in November 2022, adding just 2 tons.
Source: ETF providers, Shanghai Gold Exchange, World Gold Council
Gold poised for a retest of the all-time high with the RSI yet to breach overbought levels
Gold prices rose at the end of the week but managed to fall just shy if testing the all-time high around $2431. The precious metal put in a strong showing for the week after getting off to a poor start.
The non-interest yielding metal reclaimed its appeal as the US dollar sold off into the end of the week due to the softer CPI data. With inflation appearing to be heading lower once again, markets shifted their focus on US rate cuts which weighed on the greenback. US treasury yields (2y and 10y) actually rose on Thursday and Friday but the precious metal took its cue from the dollar.
The RSI approaches overbought territory which leaves the door open for further gains at the start of next week but upside may soon be capped if a pullback is on in order. Market conditions may land up being quieter next week due to the drop off in ‘high impact’ economic data which will likely test gold bulls. Short-term bullishness may rely on a broader lift in metals which has been advanced by sharp rises in copper and, more recently, the sharp rise in silver as ‘meme stocks’ like Gamestop (GME) and AMC Entertainment Holdings (AMC) witnessed massive price spikes.
Gold Daily Chart
Source: TradingView, prepared by Richard Snow
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‘Silver squeeze’ narrative returns as meme stocks make a reappearance
Silver (XAG/USD) made a significant break at the end of the week, seemingly spurred on by a return of the social media trend #SilverSqueeze. The movement is attempting to get one over the big bullion banks, particularly those that enter into naked short positions to suppress the price of the metal.
Friday’s sharp rise validates the break above the multi-year trendline but has also closed above the August 2020 and February 2021 spike highs that has repelled higher prices since.
Silver Monthly Chart
Source: TradingView, prepared by Richard Snow
The daily silver chart rose above $28.40 and $29.80 with consummate ease, laying the ground for a renewed bullish move. The one issue heading into the coming week is if it can maintain the bullish momentum despite venturing into overbought territory. The next level of resistance dates back to May of 2011 at the monthly spike low of $31.50. Support lingers around the psychological $30 mark and the $29.80 figure (recent swing high)
Silver Daily Chart
Source: TradingView, prepared by Richard Snow
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— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX