A recent report by Alexander Kuptsikevich from FxPro Financial Services Limited made a unique case for gold’s recent price volatility in response to an unsteady marketplace. Kuptsikevich argued that gold’s previous pull-backs before its more recent gains were not a price reversal but rather a much-needed price correction. Similarly, the U.S. dollar’s fall after a six-consecutive season rise marked another necessary correction in terms of allowing gold to strengthen again.
Gold started last week off strong, with gold futures hitting a two-month high of $2,019.60 per ounce. A few slight dips occurred immediately after this gain, pointing toward traders on the downside after momentary U.S. dollar gains. Despite this price hesitation, gold continues to show stronger performance rates than the U.S. dollar in the long term.
Earlier in July, gold corrected to its upside after “a pullback to the 61.8% Fibonacci line from the rally from the November lows to the early May peak. When fully completed, this classic pattern offers an upside potential of $2370 (161.8% of the initial move),” Kuptsikevich explained.
Based on last week’s bullish performance rates, gold’s on track to achieve Kuptsikevich’s prediction of $2,370 per ounce. The precious metal broke its 50-day moving average, even with the momentary weekly decline. Gold is still above its weekly curve, healthily maintaining a green trend.
With upsides come downsides as well, though. Kuptsikevich’s prediction of $2,370 per ounce involves potential for necessary declines as well, with support being seen around $1,947 to $1,910 per ounce. If gold breaks the $1,947 per ounce prediction, it will lose its recently gained 50-day moving average status, though any breaks above this line may be seen as false hope, according to Kuptsikevich.
Silver’s current performance rates are supporting gold’s bullish scenario. The precious metal increased by 12% from its low levels in June before a 3% correction.
According to Kuptsikevich, “A ‘golden cross’ has formed on the weekly chart: The 50-week average rose above the 200-week average. For reference, gold has been in this mode since 2017.”
Silver’s recent rise may be thanks to a shift in the nation’s policies regarding green energy. A few weeks from now will mark one year since the Inflation Reduction Act passed, with efforts to promote domestic and clean energy production. Since its passing, over 270 clean energy projects have come to fruition, with over $130 billion in invested funds.
“Of this investment, half was earmarked for new renewable energy projects, representing 25 GW of capacity – enough to power over 22 million homes. Alongside the IIJA and CHIPS Act, the IRA has contributed to a doubling of real manufacturing construction spending since late 2021, boosting US GDP growth by 500 bps since Q2 of the previous year and driving manufacturing employment to its highest level since 2008,” analysts from Bank of America explained.
With silver acting as one of the backbones of green energy, this new push toward clean, renewable solutions has given the precious metal much-needed support from industrial demand sectors. Analysts expect this support to push silver prices in a positive direction for the next decade.
Bank of America believes silver will suffer an extreme deficit as the U.S. takes over in green energy, meaning the precious metal could skyrocket in price as supply and demand rates experience high imbalances. Bank of America’s projected supply deficit for silver by 2030 is a whopping 125%. For context, other metals used in green energy production, like copper and lithium, only have deficit forecasts of 17% and 65%, respectively.
“Did you know a typical EV needs six times the minerals of a conventional automobile, and building an onshore wind plant requires nine times the minerals that would go into a gas-powered installation? According to our Global Commodity Research analysts and Metals & Mining analysts, the IRA’s energy transition incentives are set to boost demand for the critical minerals used in batteries as well as for steel, which is needed for onshore and offshore wind as well as solar,” analysts explained further.
Bank of America expects demand for silver to truly take off by 2025. The precious metal’s recent price gains make sense in the context of its greater demand shifts.
Gold, on the other hand, has experienced recent spikes in response to the Federal Reserve rate-hiking decisions, central bank gold-buying actions, and U.S. dollar performance rates. Analysts predict significant rises for gold this year and onward as interest rates settle and nations around the globe continue the de-dollarization trend.
As always, investors should consult their financial advisors before making any portfolio decisions.