One-Minute Analysis: The Bull and Bear Cases for Gold and Silver

My favorite reading involves no beating around the bush. Short and right to the point.

Here are one-minute bull and bear cases for the gold (GCM25) and silver (SIN25) markets, followed by my take on the two precious metals’ price direction going forward.

Bullish Points for Gold and Silver

• Geopolitics and the corresponding safe-haven demand for gold and silver are still in play. The next geopolitical hotspot to push gold and silver prices higher remains unclear. What we do know is that a geopolitical flare-up is never far away. That will never change.
• Both metals are still in shorter-term and longer-term overall bullish technical postures.

• The U.S. Dollar Index ($DXY) remains in a longer-term downtrend, and currency markets tend to see longer-lasting price trends.

• Central bank demand for gold has been and likely will continue to be robust as many countries around the globe want to move away from the U.S. dollar in their sovereign reserves.
• China’s economy is still shaky, which has prompted more of the Chinese public to stock up on gold due to notions of a weakening Chinese yuan on the foreign exchange market.

Bearish Points for Gold and Silver

• While the technical postures for gold and silver remain overall bullish, there are bearish chart clues that have developed recently to begin to suggest market tops are in place — especially for gold. Also, the gold market is in a very mature bull run, and the bulls may now be exhausted.
• Improving trader and investor risk appetite in the general marketplace recently is bearish for safe-haven gold and silver. The better appetite is evidenced by price uptrends in the U.S. stock indexes and strong price recoveries from the early April lows.

• The crude oil (CLN25) futures market has seen its recent price uptrend negated amid reports of slowing global demand for oil. This is due to fears of slowing world economic growth due to trade wars. Crude oil is the leader of the raw commodity sector and when crude starts to sputter, many raw commodity markets do the same.

• U.S. Treasury yields have been on the rise over the past few weeks, suggesting higher interest rates and diminishing prospects for a Federal Reserve interest rate cut in the coming months.

My Bias

The longer-term buy-and-hold gold and silver investors can still rest easy. The historical cyclicality of commodity market prices suggests new all-time highs will continue to be made in gold and silver, even if they’re down the road a way.

Shorter-term gold and silver traders should be more worried. The gold market is showing signs of buyer exhaustion in this major and very mature bull run. Recent rebounds in gold prices on the daily chart have seen the price fail to reach the previous for-the-move highs. That’s suggesting a developing price downtrend on the daily chart. My bias is that gold prices have put in a near-term market top — meaning a peak that will last at least several weeks, if not several months.

Silver prices have been trading sideways and choppy for the past five weeks, suggesting complacency or even some exhaustion from the silver bulls. I’m not quite as negative on silver as I am gold, on a near-term basis. However, I do think silver bulls will be constrained if gold prices continue to develop a near-term downtrend.

I’ll bet I’ve overlooked a bullish or bearish point or two. Tell me what you think. I really enjoy getting email from my valued Barchart readers all over the world. Email me at jim@jimwyckoff.com.