According to Jonathan Da Silva - a precious metal market analyst at Kitco, gold prices have outperformed silver this week. "As predicted in my previous article, updated charts show that the possibility of gold continuing to maintain its superiority over silver is still quite high.
The 4-hour silver chart below is similar to the chart presented last week, with the support/resistance lines extended. The chart shows that the breakthrough from the area of about 93 USD/ounce has quickly reversed.
Buyers found support at 78 USD/ounce, but it can be clearly seen that the "wall" right above 90 USD/ounce will need very strong buying power to be broken - similar to the buying pressure that appeared at the end of December and the beginning of January.
Conversely, gold prices have maintained a breakthrough above 5,100 USD/ounce, and until there is a reverse signal, this level can be considered to play a new supporting role. Below is the same 4-hour chart presented last week with the support/resistance lines above being extended" - this expert said.
According to Jonathan Da Silva, buyers really want the price to surpass the peak of March 2 at 5,360 USD/ounce, while momentum indicators continue to move in and maintain in the overbought zone. If a lower peak appears, it will be a warning sign that the market may enter a sideways phase and then slightly decrease in the short term, which may be accompanied by strong upward fluctuations, suitable for the very wide price range that was formed before.
In my opinion, in summary, this ratio is likely to continue to increase, regardless of which direction the prices of the two metals fluctuate.
In an article on January 16 titled "Silver and S&P 500: Complacency is your enemy" (Silver and S&P 500: Complacency is your enemy), I believe that the stock market has increased too far from the 200-week moving average. Although the gap between the current price and the 200-week moving average has somewhat narrowed, there is still a long way for this basic scenario to take place.
No one knows if it will happen through a prolonged sideways phase or a strong sell-off, but looking back at the history of market corrections under US President Donald Trump, the possibility of a quick sell-off seems higher" - Jonathan Da Silva shared.
Jonathan Da Silva still leaves open the possibility (although not a high probability scenario) that geopolitical instability may subside if current and new conflicts are resolved quickly.
In my opinion, this is definitely the most politically beneficial result for the current US administration.
If that actually happens, the market may enter favorable conditions for a large stock bubble, similar to the late 1990s period. Further back, if the S&P 500 undergoes a predicted correction, and the catalyst for the market bottom is resolving conflicts thanks to US leadership efforts, then it could completely become a launching pad for a strong upward cycle, similar to the October 1998 bottom" - this expert said.
