Gold, oil, silver price analysis

Gold, oil, silver price analysis
Written by:
Michael Harris
21st October, 07:55
Updated: 21st October, 07:57
  • Gold prices hovered in a tight range today north of $1,900 per ounce as investors await for news from the U.S.
  • OPEC+ held a meeting yesterday and discussed the ways of supporting the oil market amid the second wave fears
  • The U.S. investment bank Citi set a price target of $40 an ounce for silver prices over the next 12-months

Commodities are trading in a tight range today as investors are eagerly waiting for news from the U.S. related to the new stimulus plan. While gold and oil trade in a narrow range, silver prices have made important gains this week.

Gold price should race higher on a stimulus agreement

Gold prices hovered in a tight range today north of $1,900 per ounce in the lead up to the deadline for a deal over a new coronavirus stimulus plan in the United States and the upcoming presidential election in November. 

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Price of spot gold dropped 0.2% to $1,901.10 per ounce in the morning session, while U.S. gold futures fell 0.4% to $1,904.50.

“Sentiment surrounding bullion remains tentative, keeping spot gold around the $1,900-mark, as some…continue to hold out hope that Democrats and the White House can arrive at a deal over the immediate term,” said Han Tan, a market analyst at FXTM.

Tan added that gold may keep moderating as such expectations fade, “when realisation sinks in that a fresh round of U.S. fiscal stimulus is likelier to be a post-election event.”

Drew Hammill, deputy chief of staff to House Democratic leader Nancy Pelosi said Pelosi and Treasury Secretary Steve Mnuchin continued to bridge their differences over the stimulus plan. 

Pelosi expects that by the end of Tuesday we will know whether there’s a chance of passing the stimulus package before the presidential election on November 3. 

Many investors have started to trade gold lately as they consider it a hedge against inflation and currency devaluation as a result of unparalleled levels of worldwide stimulus to ease the coronavirus damage.

“A lot of investors are on the sidelines and also in particular because the (U.S.) elections are coming up,” said Brian Lan, managing director at GoldSilver Central. Lan also said that passing a new stimulus would send gold testing the upper end of the $1,882-$1,932 range.

The consolidation is taking place in Gold as the price action has created a series of the lower highs and higher lows. News on the stimulus deal are likely to facilitate a sharp move up or down, with targets set at $1,970 and $1,850, respectively. 

Oil prices stabilizing 

Elsewhere, prices of oil saw minor changes today, stabilizing after several days in the red amid concerns that an increase of new Covid-19 cases is curbing the recovery in fuel demand.

Brent crude futures lost 4 cents, or 0.1%, at $42.58 a barrel by 0635 GMT, picking up some ground after declining to $42.19 earlier in the session. U.S. West Texas Intermediate (WTI) crude futures moved up 1 cent to $40.84 a barrel, a big bounce back from an earlier drop to $40.48.

The number of new coronavirus cases hit 40 million on Monday, as the second wave in Europe and U.S. prompts new restriction measures. Vandana Hari, an energy analyst at Vanda Insights said the “clouds of gloom” are back over the oil market.

“The demand picture was already weak; the supply sentiment took a hit on Monday as Saudi Arabia and Russia steered clear of signalling that they would reconsider the planned OPEC+ January output boost,” she added.

OPEC+ held a meeting yesterday and discussed the ways of supporting the oil market amid rising fears over the resurgence in coronavirus cases.

The organization decided to stick with limiting the output by 7.7 million barrels per day (bpd) through December and strip the cuts back to 5.8 million BPD in January.

Crude oil prices are still trading above the 200-DMA despite failed attempts to clear $42.50, which remains a key target upside. Looking lower, the 100-DMA near $38 will offer nearby support to bulls. 

Silver prices could see $40 in a year – Citi

Silver price has been in the spotlight this week after a major U.S. investment bank Citi set a price target of $40 an ounce over the next 12-months. This forecast is based on a series of catalysts, such as the investor demand and the recovery in industrial consumption during 2021.

“Silver is highly-leveraged to a global (economic) recovery, with relatively limited downside,” analysts at Citi wrote in a note.

“We expect that investor demand for precious metals exposure will remain high during 2021 as pressure on governments to devalue currencies, concerns about vaccine efficacy and take-up rates and questions over equity and bond valuations and rising global debt remain in most scenarios.”

Silver prices are trading around the $25/an ounce mark, which is about 3.5% higher this week as they come close to erase last week’s losses of nearly 4%. Silver buyers are now targeting a move to the next resistance zone at $26 – $27. 

Summary

Gold prices moved in a narrow range above $1,900 per ounce as caution set in before the deadline for an agreement on a new stimulus plan in the U.S. Oil prices stabilized after declining for a few days due to concerns that the resurgence in coronavirus cases is hurting fuel demand.

Unlike gold, silver prices are trading about 3.5% higher this week after Citi set an ambitious 1-year target of $40 an ounce. 

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