- Mean reversions in Gold and Silver met but risk-off makes for the bounce.
- Gold prices ended sharply higher, rising 0.5% on a spot basis.
- December silver added 30.4 cents, or 1.8%, to end at $17.302 an ounce.
Precious metals have been stabilising on Tuesday with the value of the US Dollar capped and sent back from the highest levels since 2017 following increased expectations of further action from the Federal Reserve considering the deteriorating economic backdrop, both at home and overseas.
The major event on Tuesday came from the US data calendar whereby another telling sign that the US is not isolated from a global downturn ht the Greenback and US equities hard fuelling a bid in safe-haven plays such as precious metals. The U.S. ISM manufacturing index and September’s reading of 47.8 for it was the culprit, down to its lowest since June 2009, with all major sub-indices (production, new orders and employment) in contraction territory, i.e. below 50 – The last time the ISM manufacturing sank that low, outside of a recession, was in 2003.
Price action
Subsequently, Gold prices ended sharply higher, rising 0.5% on a spot basis, rising fro a low of $1,459.23 to a high of $1,487.30 while Gold for December delivery on Comex added $16.10, or 1.1%, to settle at $1,489 an ounce. December silver added 30.4 cents, or 1.8%, to end at $17.302 an ounce, after a 3.7% monumental sell-off on Monday, sending the contract to end below $17 for the first time since early August. Silver has, however, been a star performer over the last quarter, rising over 10% and most of which had been transacted in September, 7% of the move in fact. The gold ad silver ratio, AUG/USD, dropped a whopping 15% since the summer highs. However, we have seen a 50% mean reversion of that move as Gold continues to be favoured as the markets go-to place at times of risk-off and uncertainty. On Tuesday, AUG/USD was capped at the 50% market and dropped 0.85% from 86.65 to a low of 85.46.
Gold levels
The price dropped to a 50% mean reversion of the late June swing lows to recent highs around 1470 and now bears look to the 19 July swing highs down at 1452.93. We have the 61.8% Fibo of the same range falling in just below there at 1449.56 ahead of a full 100% retracement to 1380. On the upside, bulls will need to get back above the 1500 psychological level and then the 1535 resistance comes in again ahead of the 1,550 target which guards territories towards 1,590 as the 127.2% Fibo target.
Silver levels
A 50% mean reversion was also completed in silver at the start of this week where the price has found a vase of support just a touch below the 17 handle. Bulls need to break the 17.80s though to convince and then the and triple-top target of 18.60/80 which will bring in the 19.60s and September highs. On the downside, we have the 200-day moving average down at 15.80. The 61.8% is down at 16.10.
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