Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Gold price: recent movement and trading opportunities

In this article we look at recent movements in the gold futures and spot prices, identifying possible trading opportunities with the commodity and in relation to silver.

Gold price an inflation hedge?

Gold, often considered a hedge against inflation, has been under pressure at the start of 2021, despite central bank efforts to reignite inflation and a general softening of the US dollar. With short-term risk appetite vastly improved, we take a technical look at how traders may be viewing gold in isolation as well as when paired against silver (gold/silver ratio).

Gold – technical analysis

The black arrows on the pold price chart highlight what is known as the ‘death cross’ in technical analysis terms. This occurs when the 50-day simple moving average (SMA) - green line - crosses below the 200-day SMA (blue line). The suggestion is that the longer-term trend is now negative for the commodity.

However, gold was the second best performing of the major asset classes last year, and we argue that in the short to medium term the price is currently in a sideways rather than down. For commitment to a longer-term downtrend we would prefer to see the price confirmation with a break of key support of the range highlighted below.

The short- to medium-term range for the price of gold is considered between levels 1775 (support) and 1960 (resistance). Circled blue, we see the price reversal near support of the aforementioned range. The price reversal is supported by a move out of oversold territory. The indicator is also showing a hidden divergence signal with the price (red lines).

These are bullish signals in technical analysis terms and favour a rebound with resistance at 1870 the initial target. Traders who find long entry might consider using a close below range support at 1775 as a stop-loss consideration.

Should the price instead move to close below the 1775 support level this would consider failure of the range trade and a downside breakout, adding credence to the longer-term bearish signal inferred by the ‘death cross’.

Silver – technical analysis

The price of silver remains in a longer-term uptrend as the 50-day SMA continues to trade firmly above the 200-day SMA. In the medium term, however, we see that the price is currently within a broad range - between the 2175 (support) and 2980 (resistance) levels.

We have recently seen a reversal off resistance of the aforementioned range, and traders looking for long positions might prefer to see further weakness playing out before finding entry.

Gold/silver ratio

The below candlestick price graph is that of gold. The indicator (blue line) on the chart shows a ratio of gold (numerator) relative to silver (denominator).

The ratio has a mean (moving average) added (dotted red line) with two standard deviation line above and below this mean. The green arrows show how on a short term basis, when the ratio moves below the lower deviation line it has often reverted back to and sometime past the mean.

Movements below the mean suggest that from a short-term trading perspective that, gold is under performing silver on a relative basis. Traders might interpret this as a pair trading opportunity looking for a long position on gold against a short position on silver.

The net result of these combined trades looks for a 6.5% profit margin should the ratio revert back to the mean. A stop loss is considered of equal proportion to the expected gain.

A successful pair trade can be realised one of three ways:

  1. The long position rises while the short position falls
  2. The long position rises faster than the short position rises
  3. The short position falls faster than the long position falls

In summary

  • Gold price weaker despite central bank attempts to reignite inflation
  • Longer-term technical analysis view shows a ‘death cross’ having recently occurred
  • In the short to medium term, the gold price trades in a range and has recently shown some bullish indication at key support
  • The long-term trend for silver remains up, although we have recently seen a bearish reversal off resistance
  • The gold/silver ratio highlights gold's recent underperformance of silver

This information has been prepared by IG, a trading name of IG Markets 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. See full non-independent research disclaimer and quarterly summary.

React to volatility on commodity markets

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

1In the case of all DFBs, there is a fixed expiry at some point in the future.

See opportunity on a commodity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a commodity?

Don’t miss your chance. Upgrade to a live account to take advantage.

  • Analyse and deal seamlessly on fast, intuitive charts
  • Get spreads from just 0.3 points on Spot Gold
  • See and react to breaking news in-platform

See opportunity on a commodity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.