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Precious Metals Under Pressure

Commodities | Oct 31 2014

By David de Farranti, currency analyst

Silver has stolen the limelight in the precious metals space after plunging by over 3 percent on Thursday. A number of factors likely contributed to the precipitous drop. These include strong US data raising the attractiveness of high-yielding investments, as well further digestion of the Fed’s decision to end its enormous asset purchase program earlier in the week.

Looking ahead; it may be difficult for gold and silver to find catalysts to renew buying interest. Firmer Fed policy normalization expectations have raised the hurdle for upcoming US data to disappoint and drag the USD lower (which would be positive for the metals). Nonetheless, given the magnitude of recent declines, profit-taking on short positions and a consolidation for gold and silver should not be precluded.

Silver remains in respect of trendline resistance and its dramatic crash through the 16.70 floor keeps the immediate risks lower. Clearance of the 16.50 barrier would pave the way for a descent on the late February 2010 low near 15.60.
 


 

Gold’s latest slump has seen trend indicators align with other bearish signals. Prices have crossed below the 20 SMA and the ROC is now in negative territory. With a short-term downtrend in force the break below the 1,208 barrier suggests a possible revisit of the 2014 low near 1,180.
 

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