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Gold and Silver Diverge as the U.S. Stocks Tumble and the Dollar Surge
 

Gold

Gold rose 0.25 percent at $1,233.58 an ounce on Wednesday, managing to close above water despite of a firmer dollar. The dollar index surged 0.53 percent after U.S. stocks tumbled, breaking the potential double top pattern and lifting the upper band to 96.7.

Both gold and silver remained their upward trend. In capital market, S&P remained resilient, but the Dow Jones and Nasdaq were losing steam with the middle & small caps and tech firms collapsing. No effective solution, including liquidity, can be provided to deal with the risks. The Federal Reserve can bail out the financial institutions that hold the stocks of the firms in bankrupt crisis, but lack tools to support the prices of these companies.

U.S. stocks are very likely to remained subdued today, buoying the dollar and weighing on gold. A tumbling stock market is never a tailwind for precious metals, as they are not perceived as standard safe-haven asset to hedge against risks in stock market. Due to its attribute in heading against inflation instead of deflation, gold is more likely to move in tandem with stock market.

Precious metals are expected to rise in the medium term. But the gains will be limited, and sharp rally on chart can be hardly seen.

Silver 

Silver rose 0.67 percent to $14.64 an ounce, remaining within its trading range due to the dollar’s strength. Its attribute as an industrial metal dampens its outlook. We maintain our view that the bullish trend in silver is less clear than gold, and even remains bearish on chart. Investors are recommended to switch their positions to gold when possible.

 

Dealing Room, ICBC Beijing Branch
                       Zhao Yifei


(2018-10-25)
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