Jump to content

Gold price overbought while silver oversold


MongiIG

Recommended Posts

The gold silver ratio highlights that gold is oversold against its precious metal peer, presenting a possible short term trading opportunity

BG_silver_gold_3234234.jpgSource: Bloomberg
 
 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Thursday 15 September 2022 

Gold – technical view

091522_GoldTechnicalView.pngSource: IG Charts

The price of dollar denominated gold remains in a longer-term downtrend at present, with a renewed short-term decline suggesting 1680 and 1665 to the next downside targets from the move. There is however the suggestion that the commodity price is now moving into oversold territory.

This implies that traders who are already short might start to lock in profits towards these downside support targets in anticipation of a rebound or consolidation to follow.

Gold – client sentiment

091522_GoldSentiment.pngSource: IG

In terms of client sentiment, 85% of IG clients with open position on gold (as of the 15th September 2022) expect the price to rise in the near term, while 15% expect the price to fall.

Silver – Technical view

 

091522_Silver.pngSource: IG Charts

The price of dollar-denominated silver has recently undergone a rebound from oversold territory. The rebound has taken the price into the middle of what is perceived to be a medium-term range for the commodity’s price. The rally could be nearing an end with the bearish candle stick reversal and overbought signal suggestions.

Silver – client sentiment

 

091522_SilverSentiment.pngSource: IG

Ironically, client sentiment data for silver also shows that 85% of IG clients with open position on the commodity (as of the 15th September 2022) expect the price to rise in the near term, while 15% expect the price to fall.

Gold vs Silver

091522_GoldvsSilver.pngSource: IG Charts

In addition to the oversold suggestion on gold and the overbought suggestion on silver, the relationship between the two securities appears to have deviated from its mean over the near term.

The above chart shows a gold chart (top window) with a relative strength comparison (RSC) indication (blue line) against silver. The RSC trading below the lower Bollinger band shows that the price of gold has seen a sharp underperformance (more than two standard deviations) against its precious metal peer silver.

We maintain our view that over the short term we could see a normalization of the relationship between these two securities with gold now starting to outperform silver.

An outperformance could occur in one of three ways:

  1. The price of gold rising while the price of silver falls
  2. The price of gold rising faster than the price of silver rising
  3. The price of gold falling slower than the price of silver falling

Should this trade consideration play out, the expectation is for a net gain between the long gold position against the short silver position to yield around 5.8%.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Memecoins particularly on Solana and Ton ecosystem have kept the market buzzing for a significant part of the year as traders continue to tilt towards gaining instant and massive gains from trading memecoins against the long term gains they could amass from sustainable projects with real life applications. Interestingly the opportunities this exciting market niche holds keep rolling in with exchanges doing their bit to make it worthwhile for the passionate meme traders. So if you trade top memes like DOGE, PEPE, NEIROCTO, TURBO, WIF, SHIB, and GOAT, Bitget memecoin carnival could be of interest to you. The event slated to run from Nov 4 – Nov 18 2024 promises USDT rewards for meme traders who join, check in daily, and complete simple tasks. Evidently exchanges generate insane trading volumes from the buzzing memecoin community, rewarding meme traders through this event is a win for everyone.
    • Could it be the bustling ecosystem of multi-chain games that makes Arcadia unique? Someone recently tweete “One of the most anticipated games on the $Eth network, Legend of Arcadia, is set to launch its token, $ARCA, on various CEX exchanges” so I wonder if this strategic game could increase gameFi adoption. Legend of Arcadia is not just another card game but a strategic battleground where players collect, raise, and battle with toy-like humanoid creatures, reminiscent of the heroes from classic fantasy RPGs. The game draws inspiration from titles like Hero Wars and AFK Arena, offering a real-time battle system where strategy plays a pivotal role. When we look at other leading games in the Web3 space, like Axie Infinity or Gods Unchained, Legend of Arcadia holds its own by offering a more accessible entry point with its free-to-play model while still maintaining depth through strategic gameplay and economic incentives. It's a game that doesn't just cater to hardcore blockchain gamers but invites casual players into the fold, potentially broadening the appeal of blockchain gaming but why the recent traction to the project? Is obvious to see hype, expectations and speculation toward a project as it approaches listing date. I wonder if this is responsible for the recent traction toward Legend of Arcadia but with poolx and candybomb on Bitget and some exchange that have announced listing, we should expect more exposure for this project
    • Joining a crypto community has tremendous advantages as it keeps you ahead of over 75% of traders and gives your early information to capitalize upon. 
×
×
  • Create New...
us