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What You Can Learn by Reading Gold and Silver Technicals

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Gold and silver technicals

Gold’s price rally on September 6, 2016, was the biggest increase in the precious metal since June. July and August were disappointing for precious metals due to fears of an interest rate rise.

In August, the US Non-Manufacturing New Orders Index fell to its lowest point since December 2013. Gold’s call-implied volatility also jumped by 15.1%. Call-implied volatility measures the changes in the price of an asset with respect to variations in the price of its call option. Silver’s volatility also rose significantly.

The RSIs (relative strength index) for gold and silver also rose to 58.2 and 60.7, respectively, due to the price rally on September 6.

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Receding rate hike fears

Platinum outperformed the rest of the precious metals, rising to a two-week high of $1,106.9 per ounce. Gold, silver, platinum, and palladium have five-day-trailing gains of 3.2%, 6.9%, 4.3%, and 4.2%, respectively.

ABN AMRO analyst Georgette Boele has forecast a 25-basis-point rate hike by the Federal Reserve in December. Higher inflation numbers should be supportive of gold.

Leveraged precious metals mining funds such as the Direxion Daily Junior Bull Gold 3X ETF (JNUG) and the ProShares Ultra Silver ETF (AGQ) also saw heavy trailing-five-day returns. Over the past five trading days, these two funds have risen by 43.1% and 12.7%, respectively.

Mining equities Agnico-Eagle Mines (AEM), Primero Mining (PPP), and Silver Wheaton (SLW) also saw their prices rise by 4.3%, 5.6%, and 5.2%, respectively, on September 6. Combined, these three companies make up about 10.4% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).

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