· GOLD PRICE FORECAST TALKING POINTS:
Gold prices have remained in the spotlight throughout the year. Coming into 2020 I had called Gold my ‘top trade idea’ of the year, largely under the expectation that the FOMC would continue to soften policy after their pivot in 2019. Well, that happened, and perhaps far sooner than anyone could’ve expected. The Fed got very busy in the month of March with a series of actions that, eventually, turned an aggressively bearish equity backdrop into what became one of the strongest topside runs that I’ve ever witnessed. Gold prices benefited massively from June and into August as buyers took over and didn’t relinquish the reins until fresh all-time-highs were in-play above the $2,000 level.
But, after that fresh high was set in early-August, the music shifted with the confirmation of a bearish engulfing pattern on the same day that the all-time-high was set. Prices quickly pulled back, finding support at a confluent zone that remains in-play more than four months later. Much of the time since that fresh high has been spent with Gold showing varying forms of digestion. There’ve been multiple fits and starts of possible breakout behavior, including around the early-November elections and, a week later, news of Covid vaccines on the way erasing the bulk of that bounce on the way to those fresh four-month-lows set in late-November.
At this point, Gold prices are bound by both big support and big resistance. For support, the same zone that caught the lows four months ago remains in-play today. For resistance – we’re looking at another confluent zone of prior support, spanning from the 1900 psychological level up to the 1920 prior all-time-high.
GOLD PRICE DAILY CHART
GOLD PRICES NEAR-TERM: BULLISH CONSTRUCTION CONTINUES
Going down to shorter-term charts may add some enthusiasm for the topside theme in Gold prices. Since setting a fresh four-month-low in early-December, buyers have continued to pose a series of higher-highs and higher-lows. Last week was especially important for that backdrop as buyers put in multiple defenses of support around 1823.71, which is the 61.8% retracement of the June-August major move. This is the same study from which that four-month-low was defined, around the 76.4% retracement of that same study.
Notable is the continued pattern of higher-highs and higher-lows, with current support grasping for the 50% marker from that same major move.
GOLD PRICE FOUR-HOUR CHART
GOLD INTERMEDIATE-TERM
For those with bearish Gold biases, there could possibly be supportive criteria from an intermediate-term time frame. This would largely be built around the idea that the December strength is corrective in terms of a longer-term bearish scenario. The recent lower-low, combined with a hold of resistance around prior support, could keep the door open for short-side trends.
This also exudes the importance of following near-term support around the 50% marker of the June-August major move, as sellers taking this level out would be the next step to a deeper bearish move.
GOLD PRICE EIGHT-HOUR CHART
· Silver technicals still longer-term bullish
The silver market in early 2020 hit a seven-year high of $29.915 and has since backed off that high. The weekly chart for nearby silver futures shows the choppy consolidation of recent weeks has formed a bullish pennant pattern. A move in prices above longer-term chart resistance at $27.50 would produce a bullish upside breakout from the pennant pattern, to then suggest much higher price potential in the coming weeks and months.
Silver prices have a tendency to track gold but as recent months have shown the silver market can actually lead gold prices higher. Look for sideways-to-higher price action in the silver market in 2021.
· Silver price unlikely to hit $50 in 2021 but analysts still see potential to outshine gold
Gold will play an important role as investors look for protection against ultra-loose monetary policy and fiscal stimulus measures in 2021, but some analysts expect that the new year will be silver's time to shine.
The silver market has seen a breakneck rally in 2020 as prices more than doubled after falling to a multi-year low around $12 an ounce in March. Many analysts see the current trend continuing as global monetary policies and industrial demand come together to push the precious metal out from gold's shadow.
With gold expected to retest its 2020 all-time highs, some extremely bullish estimates have also crept into the silver market. As silver was able to double in value from the March lows, some analysts have said that the feat can be achieved again in 2021.
While a move back to $50 an ounce is not out of the realm of possibilities, most analysts see a more nuanced rally for the precious metal, with many looking for prices to push above $30.
- Canadian Bank CIBC could be the most bullish on silver as they see prices averaging next year around $32 an ounce.
- Bank of America expects that silver prices will outshine gold in 2021. The bank made headlines in November after it walked back its forecast for gold to hit $3,000 late next year. While the bank is neutral on gold, they remain overweight silver.
The bank said it sees silver averaging next year around $29.13 an ounce with prices pushing above $31 an ounce.
An outlook presentation last month silver's outlook remains bright as a new focus on green energy could increase demand for solar panels.
- Although industrial demand will play an important role in the silver market as the global economy starts to recover from the COVID-19 pandemic, some analysts note that investment demand will be important.
Steve Dunn, head of exchange-traded products at Aberdeen Standard Investments, said in a telephone interview with Kitco News that he expects silver will continue to attract investors as it is still relatively undervalued compared to gold.
"I think silver's strong value play will be an important theme in 2021 for investors," he said. "Silver has made some big moves this year, but it still has room to catch up compared to gold."
- However, not all analysts are bullish on silver next year. Harry Tchilinguirian, senior commodity economist at BNP Paribas, said in an interview with Kitco News in late November that he sees one more rally for gold in the first quarter and then lower prices into the end of 2021. He added that because of their close correlation, falling gold prices will also weigh on silver.
- BNP Paribas is looking for silver prices to average about $23.50 an ounce next year.
Although Tchilinguirian see lower gold and silver prices next year, he added that silver’s industrial demand will help it generally outperform the yellow metal.
Reference: DailyFX, Kitco
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