Investors have been keen on precious metals as of late. Gold is trading over 7% higher quarter-to-date while silver trades almost 17% above September’s close. Situation is especially interesting as it comes in spite of the strengthening of the US dollar. While it is common for precious metals to gain when inflation is accelerating, it is also common for gold/silver to drop when the US dollar is strengthening. This correlation held firm throughout most of the post-pandemic recovery but has broken down recently. A look at SILVER chart plotted against inverted US dollar index (USDIDX, light blue overlay) pictures the situation perfectly. Precious metals market and USD market disconnected more or less at the beginning of November and the gap keeps on widening (orange circle). Silver failed to break above the 200-session moving average (purple line) at the beginning of this week. However, a brief pullback was halted at the $24.70 price zone yesterday and it looks like the precious metal may be readying for another test of the aforementioned moving average. Should we see a break above it, bulls’ attention will shift to resistance at $25.75, marked with the 23.6% retracement of post-pandemic recovery move. Note that a number of Fed members is scheduled to deliver speeches this afternoon and it may have an impact on the US dollar. However, whether it will have an impact on precious metals is a different story.
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