SILVER : Reaching Gold?

(Fri, 20 Nov 2020). Even as the US Dollar has failed to rally, precious metals’ prices haven’t had an easy going. But gold, silver, and platinum are not moving in unison. A key differentiating factor may be the reason why: real economic utility.

Both the silver/gold and platinum/gold ratios have risen throughout November, tracking gains in equity markets and optimism around coronavirus vaccines developments.

PRECIOUS METALS COMPLEX DIVERGES

Optimism has defined the first two-plus weeks of November, with global equity markets pressing higher amid news that multiple coronavirus vaccines were proving effective in Phase II and Phase III trials. Amid news that coronavirus vaccines are proving promising and moving towards distribution among frontline healthcare workers by the end of this year, investors’ optimism has provoked more risk taking in financial markets. This optimism for a vaccine has proven detrimental for safe havens like gold, silver, and platinum.

ECONOMIC NEED, INDUSTRIAL USAGE PROP UP SILVER AND PLATINUM

With US real yields rising, the precious metals complex has been harmed. Unlike gold, however, silver and platinum are not just seen as safe havens, but benefit from the renewed economic optimism. Both silver and platinum have utility in the real economy: they are used in jewelry and industry (automobiles, batteries, electronics and solar panels, for example). The rebound in global consumption coupled with optimism around a COVID-19 vaccine(s) has strengthened the real economic foundation upon which silver and platinum prices rest.

Both silver and platinum prices have outperformed gold prices throughout November, with the respective XAG/XAU and XPT/XAU ratios rising over the first two-plus weeks of the month. It may be the case that, even in an environment defined by low interest rates and substantial fiscal stimulus, gold prices may continue to lag silver prices and platinum prices in the near-term.

Silver prices remain within their bull flag/triangle, which has been in place since the end of July. A sideways range has been carved out in recent weeks, dating back to September, between the 23.6% and 38.2% Fibonacci retracements of the 2020 low/high range (22.8996/25.5594).

It may be the case that the break through the coronavirus pandemic trendline is insignificant if the triangle is the predominant focus. Unfortunately, momentum is flat. Silver prices are still intertwined among their daily 5-, 8-, 13-, and 21-EMA envelope. Slow Stochastics are pointing lower but straddling their median line, while daily MACD is flat at its signal line.

Silver: Retail trader data shows 88.59% of traders are net-long with the ratio of traders long to short at 7.76 to 1. The number of traders net-long is 2.15% lower than yesterday and 2.20% lower from last week, while the number of traders net-short is 2.23% higher than yesterday and 7.51% higher from last week.

Platinum prices have a more bullish technical footing than silver prices, with the downtrend from the July and September highs breaking as of the close on November 18. Follow through to the topside is gathering pace, with platinum prices breaking higher above the descending trendline from the March 2008 (all-time high) and January 2020 highs.

Platinum prices are above their daily 5-, 8-, 13-, and 21-EMA envelope (and the difference between the daily 5-EMA and daily 21-EMA is increasing). Daily MACD is rising at an increased pace above its signal line, while Slow Stochastics are comfortably nestled in overbought territory. The path of least resistance is higher in the near-term.

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