Gold Market Wire
News, analysis and commentary for gold traders and investors
Gold and Silver Market Update
Metals Make a Move
October 8, 2021 - (Gold Market Wire) - In the investment banking world, where most of the Gold and Silver is traded and/or executed for clients, there is a true symbiosis between those on the Oil desk and those on the Metals desk. In fact, personnel between those two markets change hands quite often, as people with the experience of one market seem to have a better grasp of the other, and can handle the high volatility they have.
Because of the 1970s, there is also a history of a strong relationship between the two markets. The oil crisis and the Golden Bull happened close together in time, as revolution swept Iran and Afghanistan was invaded by the Soviets. The advent of the OPEC era (in the early 1970s) also was matched by the first signs of real life in Gold, largely as a result of Nixon's closing of the 'window' with the rest of the world. Over the long term there appears to be moments where the behaviour of one market is reflected in the other. We seem to be entering another of those moments.
The story of the day is Oil, and it is a big story, with a lot of room to run. We're up 30% in a couple of months in the crude market, with NatGas absolutely exploding in the wholesale market and governments trying to ease pressure in the retail energy sector. Eventually, the slumbering sisters of Gold and Silver would have to play catch-up, and they finally have. Both markets are now gapping up.
Our chart, especially in the August 10-12 gap, reveals the importance of the level, and if we add in the action off of $1725 (four touches) in the above chart we can start to make a picture for a market that has fended off the downside action. Silver has also made its move.
The key, has been the rocket-ship of the energy complex, and the tail-wind of higher food prices and lumber prices. The Commodity Complex is storming, and the Metals don't seem ready to be completely left behind. Of course today's big miss in non-farm Payrolls, with a big bump in wage hikes was the catalyst, but the general Commodity Complex is the foundation for the move. Prices are going up - everywhere.
So, is that the end of the down move from $30 in Silver, that's has stretched back for some 8 months now? We are leaning towards the possibility that it is. There are simply too many forces encouraging higher prices for Precious Metals. And so, some re-establishing of the core is in order, as well as some trading length. The last factor in our decision-making has been the metals' ability to hold on while equities got battered. To us, that shows resilience. Of course a wipe out in the equity market could still play havoc with our plans, so we are treading carefully on the size front, but we are prepared to put a foot in the 'water' of the market to see how we develop. We are starting to doubt whether another lurch down in the Metals is going to materialize. In Silver terms we are some 25% off the highs, in an environment where political confidence is being battered and commodities are roaring higher, and the market has defended its corner amidst equity carnage. That defense, as we noted earlier this week, was always, to us, something of a strange/remarkable occurance. We found it anomolous to our expectations. And that means the tenor of the market has changed, and we need to change with it.
That's enough for us to now re-open the book.