Is it Time to Buy Precious Metals Again?
Metals pushed to the front of the pack in November. Gold and Silver both had their best month since 2020, and Copper prices rose by more than 12%.
At the end of October, it looked as though Gold prices were stuck beneath the low end of their 2020-2021 range and headed back toward their COVID lows. The problem for precious metal bears, though, was that Gold’s decline hadn’t accelerated when those lows were initially broken. Even worse, Silver prices had failed to confirm the breakdown. In fact, while Gold was setting new lows, Silver was setting higher ones. Silver tends to lead while precious metals are rising and lag when metals fall, so it was unusual to see Gold falling while its counterpart was putting in what looked like a healthy base.
Silver looks even better today.
The 2019-2020 highs provided a perfect springboard to launch Silver back above those 2021 lows, and it wouldn’t be surprising to see it retest multi-year highs. For those of you keeping score, that would be 25% higher from here.
Gold is battling near-term resistance at its August highs, and it’s yet to convincingly exceed the 200-day moving average. Still, the chart is in better shape than it was a month ago, and if prices can hang above 1800 for a week or two, there’s no reason it couldn’t join Silver in a retest of the highs.
The fate of metals may rest in the hands of the US Dollar.
Dollar strength has been a headwind for equities and metals for much of the year, as it rose 20% from January through September. With markets increasingly anticipating a slowing in Federal Reserve tightening actions, though, the greenback is giving back some of its gains. On Thursday, the US Dollar Index closed below its 200-day moving average for the first time in well over a year.
The swing high from May acted as support in August, and buyers will likely step in here as we test that level again. Whether or not they’ll be strong enough to halt the currency’s decline is another question altogether – but the answer will help decide the future of precious metals.
In case you were wondering about the absence of Means to a Trend updates over the last few weeks, I’ve been busy keeping track of another ‘precious commodity’. My wife and I welcomed our third child in November. Chip is VERY excited about his first little brother.
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