Friday saw some bonkers moves in precious metals. Gold jumped over $60 at one stage to top $2,430 and make a fresh record high. It subsequently reversed sharply, closing lower for the day at $2,345. It was a similar story for silver which had a high-low range of just under $200, or around 6.5%. Much of the rally was driven by safe haven demand ahead of the weekend.
Investors were getting concerned about the increased probability of an Iranian attack on Israel, and were also unsettled by last week’s sell-off in equities. But the pull-back came as the speed and size of Friday’s rally looked overcooked, especially considering the gains already seen in precious metals since mid-February. But as mentioned in previous market notes, this is precisely the kind of price action we can now expect from gold and silver. Precious metals are starting to attract a wider audience. With equities still near all-time highs, geopolitical tensions ramping up and as traders try to battle their ‘fear of missing out’, volatility should continue to ramp up.
In the daily chart of silver, we can see that resistance comes in around $30 per ounce. When a critical mass of investors appears to habituate to the idea that a market can only go higher, the probability of a devastating sell-off rises significantly. Such moves can be so unsettling that they drive the bulls out of the market all together, before snapping back sharply. In essence, for some unfathomable reason, price will move in a way to cause the maximum amount of discomfort to the largest number of traders, whether long or short. We saw a foreshadowing of that kind of move on Friday. But traders should be prepared for more of the same, but with the dial turned up to 11. Having identified $30 as resistance, the most obvious downside target for support is $26. Let’s see if we get there.
Investors were getting concerned about the increased probability of an Iranian attack on Israel, and were also unsettled by last week’s sell-off in equities. But the pull-back came as the speed and size of Friday’s rally looked overcooked, especially considering the gains already seen in precious metals since mid-February. But as mentioned in previous market notes, this is precisely the kind of price action we can now expect from gold and silver. Precious metals are starting to attract a wider audience. With equities still near all-time highs, geopolitical tensions ramping up and as traders try to battle their ‘fear of missing out’, volatility should continue to ramp up.
In the daily chart of silver, we can see that resistance comes in around $30 per ounce. When a critical mass of investors appears to habituate to the idea that a market can only go higher, the probability of a devastating sell-off rises significantly. Such moves can be so unsettling that they drive the bulls out of the market all together, before snapping back sharply. In essence, for some unfathomable reason, price will move in a way to cause the maximum amount of discomfort to the largest number of traders, whether long or short. We saw a foreshadowing of that kind of move on Friday. But traders should be prepared for more of the same, but with the dial turned up to 11. Having identified $30 as resistance, the most obvious downside target for support is $26. Let’s see if we get there.