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As retail buying receded, silver corrected and the USD broadly rallied, which then weighed on gold. Yet, strategists at HSBC think that gold looks better supported as the market focus is likely to shift from silver to more bullish US fiscal developments and other geopolitical issues.

Key quotes

“The gold to silver ratio is back at around 1:71 after hitting 1:63 on February 1, indicating that silver is losing ground again to gold and implies the rally has turned. If silver does not stir higher again, market attention is likely to shift back to gold. This may mean that the focus will return to issues like risk appetite, the USD and US Treasury yields.”

“The Biden Administration is negotiating with Senate Republicans on a COVID-19 stimulus package. The possibility of bipartisan support for a stimulus package is a potential plus for gold. But this may be difficult to achieve. A possible reduction in the US stimulus package would also likely prove less bullish for gold.”

“Gold has some potential support from geopolitical developments. Italy’s president, Sergio Mattarella, has asked Mario Draghi, former president of the European Central Bank (ECB), to begin talks to form a new Italian government of national unity as the country battles against COVID-19. This came after talks looking at reviving the governing coalition led by Prime Minister Giuseppe Conte collapsed earlier. Pandemic-related uncertainty still has the power to trigger ‘safe-haven’ gold buying.”