CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Gold and silver prices set to resume rally after profit-taking

July was a big month for gold, but arguably even bigger for silver. But both have met resistance this week as investors looked to cash out, though analysts at Commerzbank believe the rally will resume after profit-taking finishes.

July was a huge month for Spot Gold, climbing from $1783 an ounce at the start of the month to break above the key resistance level of $2000 in early August.

However, it is fair to say that July was an even bigger month for Spot Silver (5000oz), with the precious metal soaring from $18.25 an ounce to close out the month at over $24 an ounce. The momentum produced in July helped propel the price as high a 29.88 in early August.

Since hitting those highs, however, both precious metals have succumb to what many would describe as an overdue correction, with gold trading at $1940.33 an ounce at the time of publication, while silver sitting at $26.76.

The slight slide in gold and silver prices may have some investors spooked, but given the headwinds plaguing global equities the flight to safe haven assets is unlikely to end anytime soon, with analysts at Commerzbank expecting precious metals rally to resume after some profit-taking.

Commerzbank projects precious metals rally will resume after profit-taking

The gold and silver price rally may well have stalled this week, but with central banks considering applying negative interest rates to support the global economy and further government stimulus expected, investors interest in precious metals is unlikely to wane.

‘[Gold] made another attempt yesterday afternoon to reach the record high it posted at the end of last week, though it failed and only made it to $2050,’ Commerzbank analyst Carsten Fritsch said in a note to investors. ‘The price has been on a downward trajectory ever since.’

According to the German lender, significant profit-taking this week after extensive gains throughout July is likely the catalyst for precious metals recent slide, with Fritsch unable to rule out gold falling as low as $1924 an ounce as a result. But the outlook for both commodities remains strong in 2020.

‘The scale of the upswing over the past four weeks has been excessive,’ Fritsch wrote. ‘The price rise was almost solely attributable to robust investor demand, with all other demand components playing hardly any role. It is understandable that investors now appear to be taking profits.’

‘The long-term outlook for gold and silver remains positive, however. Prices are likely to begin rising again as soon as the current correction has finished,’ he added.

Gold price: technical analysis

Spot Gold has been consolidating after yesterday’s rebound seen in the wake of a historic $200 decline from last week’s peak of $2075, according to Josh Mahony, senior market analyst at IG.

‘The wider uptrend is coming back into play as things stand, with price having respected the confluence of Fibonacci (76.4%), trendline and moving average (200) support,’ he said.

‘With that in mind, there is a good chance of further upside, with the break from this current consolidation zone of $1907-$1949 providing a key directional bias or the short-term.’

Silver price: technical analysis

Silver prices ran into a key area of resistance last week that has since held buyers at bay, according to James Stanley, strategist at DailyFX (part of IG Group).

‘This level shows at 29.14, which is the 50% marker of the post-Financial Collapse move in silver prices,’ Stanley said.

‘That price held the highs on Friday of last week and again on Monday of this week; and yesterday’s outsized pullback saw prices dip all the way to the 61.8% retracement of that same major move, which has since come in to help provide support,’ he added.

How to trade commodities with IG

Looking to trade gold, silver and other commodities? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Spot Gold’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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