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85.30 gold/silver ratio helps investors to diversify gold into silver

Silver bulls' next upside breakout objective is closing prices above technical resistance at $15.50

Deteriorating global growth in the middle term should support gold and silver prices


Gold and silver can be somehow bearish in the short term, but bullish moves in the long run. Goldman Sachs hiked its silver price forecast by 25 cents an ounce (31.1035 gram) each time window. The firm now expects silver at $16.50 in 3 months, $17.00 in 6 months and $17.50 in one year. Although silver’s industrial demand looks anemic going forward, Goldman Sachs is optimistic that silver will continue to rally in line with gold prices. At the same time, a high gold/silver price ratio should help incentivize investors to diversify some of their gold holdings into silver.

The bullish sentiment comes at an important time for gold, which has been hit with a wave of selling pressure as investor optimism in equity markets has weighed on the yellow metal. Gold prices have dropped nearly 5% since hitting a 10-month higher last month. While silver hit a nine-week bottom. The silver is defying gold’s weakness. Silver may futures bears have the overall near-term technical advantage amid the recent price downdraft. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $15.50 an ounce.

The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is seen at Monday’s high of $15.295 and then at $15.50. Next support is seen at $15.00 and then at $14.90. Goldman Sachs cites strong employment conditions in US that will keep late-cycle worries elevated. Also, low European growth with negative real rates boosting European ETFs. Additionally, geopolitical tensions will remain elevated, pushing risk appetite down and bets on less risky assets.

Analysts believe deteriorating global growth in the middle term should support gold and silver prices. A poor economic outlook in Europe, irrespective of idiosyncratic issues, along with continued disappointments on the Chinese economic front and slowing US growth into 2019 should all conspire to reduce risk appetite. Now, both gold and silver markets are technically oversold on a short-term basis and due for corrective bounces as soon as this week. May Comex silver was quoted on Thursday at $15.10.

Upbeat trader and investor risk appetites in recent weeks are keeping gold and silver buyers scarcer. As long as world stock markets remain in near-term price uptrends it will be difficult for gold and silver markets to sustain rallies. However, there are some very early technical clues the US stock indexes might be seeing their price uptrends starting to “roll over.” Price action the rest of this week will be extra important for the U.S. stock indexes, and in turn the fortunes of gold and silver bulls.

The unofficial China purchasing managers’ index (PMI) for February came in at its lowest level since October. China also lowered its projected gross domestic product growth for the year. The National People’s Congress lowered its 2019 GDP growth estimate to a rate of 6.0% to 6.5%, from 6.5%. Chinese economic officials also pledged to continue to support the manufacturing sector and emerging businesses, including new deficit spending and tax cuts.

Courtesy - DNA

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