Gold and Silver Spread Betting Markets May Indicate Breakout
Since the October 2008 lows of $682.50 the yellow metal has recovered its lustre, initially moving up in conjunction with equity markets and on the back of a weaker US Dollar.
This move higher also coincided with the move higher in the single European currency as markets stabilised on the back of unprecedented governmental intervention.
The unprecedented global stimulus undertaken by governments around the world has had the effect of pushing Gold higher as investors and central banks have sought to diversify their reserves.
This has mostly been due to the widespread currency devaluations that have been taking place and investors have responded by rotating these reserves out of fiat currencies into more tangible assets like gold, silver and platinum.
Up until December last year the single currency, equity markets and gold had moved in lock-step with each other from the lows posted in 2008.
This relationship started to unravel at the end of last year when concerns about sovereign risk started to come to the fore as we saw sentiment start to sour towards the single currency as well as equity markets.
Last week’s Euro rally has seen gold slip back from its highs against a number of currencies but in particular the single currency, after it failed to sustain a move above its new all-time highs just above €1,000 an ounce.
These recent falls in gold against the US Dollar should find support around the $1,175.50 trend line support from the 2008 lows. Just below this support we also have support around the 200 day moving average around $1,135.
While these support levels hold then the gold price should continue to make gains towards the $1,500 level.
Worries over sovereign debt problems in the Eurozone have helped gold in recent months but last week’s successful bond auctions in Spain, plus the further sales of IMF gold reserves, helped push the yellow metal briefly below $1,200. This seemed to be mostly on profit-taking as well as fears that the gold trade could be getting a little crowded.
What has been most notable about this particular rally in the gold price has been the failure of both silver and platinum to follow through with fresh new highs in line with their bigger, shinier brother.
One of the reasons for the poorer performance in silver has been in its wider use as an industrial metal so it invariably gets sold off on the back of poor economic data.
This invariably causes it to lag behind when gold pushes higher on safe haven demand. However, it would appear that the silver price could well be gearing up for a push higher despite the recent slide lower in the gold price.
Silver has trend line support from the 2008 lows at the $16.72 area and has continued to find support at progressively higher levels.
For the recent gains to continue we would need to see these levels hold, and for the recent highs at $19.50 to get taken out and re-target the highs in 2008 at $21.35.
The Gold/Silver ratio can sometimes give clues to a move in either the silver or the gold price and, judging from the correlation below, it could well be building up for a break out.
In the last few months it has been consolidating sideways in a triangular consolidation and could be lining up for a serious move.
A break to the upside in this correlation would signal an outperformance of gold relative to silver, while a break to the downside would signal an outperformance of silver relative to gold.
As with most triangle patterns the trading opportunity is on the break-out of the pattern and, as such, attention should be paid to the upper and lower boundaries of this consolidation phase at $70.06 and $63.89.
Only time will tell whether we get a break out, but this correlation could well offer clues to the next move in either the gold or the silver price.
Spread betting, CFDs and FX are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.
The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.
Article approved by CMC Markets. CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Gold and Silver Spread Betting Markets May Indicate Breakout', Feature by D. Jones, last update: 8-Jul-10
Related articles:
CMC Markets, 27-Jan-12,
CMC Markets offers 1200+ Spread Betting markets and a wide range of CFDs. With a CMC Account you can trade 24 hours a day on Forex, Indices, Commodities and...see: CMC Markets
CMC Markets Spreads, 27-Jan-12,
CMC Markets offers both Spread Betting and CFDs. You can trade 24 hours a day on a wide range of markets including Indices, Currencies, Commodities and...see: CMC Markets Spreads
CMC Markets Spread Betting, 27-Jan-12,
The new CMC Markets spread betting platform delivers consistently competitive spreads. These new spreads, improved margins and additional decimal places are exclusively available on the new CMC Markets trading platform. With CMC you can...see: CMC Markets Spread Betting
CMC Markets Offer, 17-Jan-11,
Spread Bet Risk Free for a Week with CMC Markets. Open a CMC Markets account and fund it with £200. You will then be able to...see: CMC Markets Offer
Forex Indicators, 7-Jun-10,
Forex Indicators: EUR/USD has broken its final short term support at $1.2110 and plummeted on Friday. The next support level is from Feb 2006 and is at...see: Forex Indicators
Stock Market Indicators, 26-May-10,
Stock Market Indicators: The SPX 500 has reached yet another support level at 1043, can it hold? The MACD is again showing an acceleration in the...see: Stock Market Indicators
Commodities Indicators, 14-May-10,
Commodities Indicators: Gold reached a fresh all time high on Wednesday, the metal hit $1248.5. It is currently...see: Commodities Indicators
Commodities Set For a Correction?, 7-Jan-11,
The Reuters CRB has always been a good indicator of broad commodity strength so when it starts to exhibit signs on a possible reversal it’s usually time to sit up and take notice. Since the peaks of 2008 the...see: Commodities Set For a Correction?
Best Spread Betting Service, 30-Nov-10,
CMC Markets have been awarded the title of 'Best spread betting service' by readers of Shares Magazine at the Shares Awards 2010. ''The award is very important to us because it is voted for by...see: Best Spread Betting Service
US Index Spreads Fall to Key Support Levels, 2-Jul-10,
US Index Spreads Fall to Key Support Levels: The last three months have been fairly volatile ones for equity markets in general and certainly the first quarter of 2010 began promisingly. The S+P 500 had, until this quarter, posted 4 successive quarterly gains in a row since...see: US Index Spreads Fall to Key Support Levels
Spread Betting Markets Looking Bearish, 25-May-10,
Spread Betting Markets Looking Bearish: The recent declines in equity markets over the past couple of weeks have prompted some investor nervousness about the sustainability of the recent rally of the last 14 months. We've certainly seen corrections similar to...see: Spread Betting Markets Looking Bearish
Euro Spread Betting and the Bailout, 12-May-10,
Euro Spread Betting and the Bailout: The Euro has continued its slide back from its overnight highs after a slow realisation that the bail-out, while welcome from the point of view of bringing down...see: Euro Spread Betting and the Bailout
Looking to improve your trading results? Get free trading tips and trading analysis as well as the latest trading offers »
Trading News.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
