Heavy Metal Selling

Anxiety about an increase in COVID-19 cases and fears of a second wave coupled with revelations of historic money laundering practices of major global banks weighed heavily on financial markets yesterday.

Precious metals were not immune to the sell-off which saw gold below $1,900 and silver off a whopping 12% during intraday trading.

The following charts show the short term support that halted the rout in precious metals by the end of the day yesterday.

(Click on image to enlarge)

With the negative news pushing gold through the 50-day moving average and previous short term support at $1,925 (Support #1), it continued the sell-off falling as low as $1,880. As with most markets, the daily close is significant for traders and gold closed just above the previous support of $1,910 (Support #2).

Gold remains vulnerable in the short term to a further pullback, particularly with a close below $1,910 which could target the next major support level at $1,810

However, in the long term, the bull trend still remains intact and the fundamentals are extremely supportive of gold. These pullbacks present a major opportunity for long term investors to either get invested or add to their gold holdings.

The sell-off in silver was much deeper than gold with the white metal being down over 12% at one stage intraday.

(Click on image to enlarge)

Again a breach of short term support triggered by a weakness in the broader markets saw the start of the sell-off. Momentum selling took silver through the support at the 50-day moving average and it didn’t find support until just above the previous major support level at $24.65. Similar to gold, close below this support level could pave the way for a further pullback to the next major support level close o $23.00.

A resumption of the uptrend short term would require a close above $26.65.

Silver is always the more volatile of the precious metals and one-day pullbacks by their nature tend to be larger than one-day rallies. However, like gold, the long term uptrend in silver remains intact and the fundamentals that underpin silver are stronger than ever.

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