No major up move in Gold next week, may underperform Silver in short term; charts show bullish trend in Silver

October 22, 2021 10:04 AM

Silver meanwhile has breached its previous swing high of 65600 on daily scale and shown sharp recovery lately.

gold, silver, mcxNext week we expect gold to test resistance of 48100 while support of 46800-46700 is emerging as a good base for the short term

By Bhavik Patel

The Fed may have wrongly anticipated inflation to be transitory. Inflation is not transitory and that will be the most important thing in determining the direction of the economy and the markets. We are looking at global tightening and it is going to have major repercussions. I have already stated before, that Gold and silver will see bottom once the US Fed starts tapering their assets. Gold currently has competition from cryptocurrencies, as Bitcoin is trading near all time high. Inflationary pressure should be positive for gold but funds are rotating into other safe haven assets namely US dollar and US Treasury yields.

Silver is attracting my attention and I can’t help but be positive in Silver. I believe silver will outperform gold in the short term. I have been bullish in Silver since last one month when money managers have covered their short positions and are now slowly accumulating long positions. Until six to seven months, silver was going nowhere while gold was recovering modestly up. Silver could easily trade back up to $30. Once the metal moves above $26, it will open great upside. The problem with silver was that investors were trading it as a precious metal and speculators were pouring money into bitcoin but now with the rally in base metals, interest is returning back to Silver. Not to mention that silver is used in solar panels and electric conductivity which is important in the new green deal. Silver is eyeing breakout on technical charts and so my flavour of the week would be Silver.

It seems for the moment until the Federal Reserve convenes for its next FOMC meeting on November 2, gold will continue to trade in a range-bound manner reflecting the dynamic crosscurrents. Gold has managed to keep its head above the 200 day moving average and there is a crossover of 20 and 50 day moving average which shows gold could move higher.

Next week we expect gold to test resistance of 48100 while support of 46800-46700 is emerging as a good base for the short term. RSI_14 is at 58 so there is room on the upside but we are not anticipating any major moves next week.

Silver meanwhile has breached its previous swing high of 65600 on daily scale and shown sharp recovery lately. Although it is below the 200 day moving average, we believe silver is on a mission to catch lost ground. Silver is on the cusp of a crossover of 20 and 50 day moving average and historically we have seen a rally of at least 1500 points once crossover is completed. Next stop for silver on the upside is at 67200 while 62680 seems to be good support. Bias remains bullish for next week and buy on dips strategy should be utilized

(Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities. Views expressed are the author’s own.)

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