Precious Metals Forecast: Silver Defends $70 as Gold Tests $4,400

What to Know

• Silver bounced from the key $70 support level after sharp volatility
• A breakdown below $70 could trigger a fast $5 downside move
• Gold struggled to extend gains above the $4,400 resistance area
• Thin holiday trading may increase short-term volatility
• Long-term fundamentals remain bullish due to central bank demand and rate-cut expectations

The silver market has bounced a bit during the trading session on Tuesday from the all-important $70 level. Monday was an unmitigated disaster. That being said, this is a market that still has a lot of undersupply for massive demand, and I think they will continue to push the issue here.

The question at this point is whether or not we can break out, and I really do not think it is a good idea if we do. This will only lead to more pain in the end. What we have here is a perfect opportunity to build some type of consolidation phase, perhaps bring more people into the fold, and then strengthen the uptrend.

For now, it is obvious to me that the $70 level is important and will continue to be an area of great importance. If we break it down below there, you are probably looking at losing $5 pretty quickly.

Gold and Silver Technical Outlook

Gold markets tried to break over the $4,400 level but were a little stagnant later in the day. This is quite interesting, and we will have to see if this is a bit of a harbinger. Clearly, the insanity going on in the silver market does not seem to be transferred to the gold market, at least not on a one-to-one basis. This tells me that perhaps as we head toward the end of the year, there is going to be further divergence.

That being said, from a technical analysis standpoint, this is exactly where you would expect gold to rally. Whether or not it can sustain that remains completely an open question. You should keep in mind that Wednesday will be a shortened session and Thursday will be a closed session; there will be no trading.

Over the longer term, this looks a lot like a market that I do believe goes higher. From a fundamental standpoint, gold is being used to protect balance sheets, especially with central banks that see a lot of problems out there and massive debt loads coming from various economies, especially places like Japan and Europe, not to mention the United States.

Fundamentals

If central banks continue to cut rates, that will lift gold over the longer term, but silver is a completely different situation. Here, you have a market that has been undersupplied for five years, and now suddenly everybody cares. Part of this was kicked off by the AI boom, but we also have problems with the London Metals Exchange, perhaps not having enough silver to settle physical demand. That could break something very quickly. Both are in an uptrend, and I would not try to overthink it, but more importantly, I would try to not over-leverage my position to the upside. Shorting either market at this point in time is all but impossible.

 

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