Gold And Silver: A Psychology-Driven Bear Market
MetalMiner | May 27, 2014 05:10AM ET
Gold is the only commodity where physical annual demand is only a tiny fraction of total supply available and shortages of gold caused by physical demand never happen. For this reason, the price of gold is almost entirely dependent on psychology and the factors that drive psychology, such as inflation and the dollar. Despite all that, we still see analysts writing lengthy reports analyzing factors with zero predictability, such as jewelry usage and annual gold production.
The strong relationship between silver and gold makes it mandatory to study and understand both precious metals together. Despite recent attempts to go higher, both metals (and almost any commodity) remain in a falling market since 2011.
h3 Gold and Silver prices since 2013/h3
We already commented in February that the price increase in the beginning of the year were likely to fail. We recommend that buyers follow the trend and not worry about normal price fluctuations. We expect both precious metals to remain at low levels and we wouldn’t be surprised to see them recording new lows.
The performance of the US Dollar Index will give good clues on where these two metals will head through the rest of the year. The US dollar remains relatively stable and unless the dollar falls to new lows, we don’t expect silver and gold prices to mount a comeback.
h3 What This Means For Metal Buyers/h3Silver and gold prices keep weakening, remaining in a falling market. The current picture tells us that we could see more of a downward slope. We believe that there is no need for buyers to take long-term positions. In a falling market, it makes sense to wait for bullish signals before making early decisions.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.