(Kitco News) – While market sentiment toward both gold and silver remains cautious, the geopolitical and financial environments still favor gold, while economic uncertainty will weigh on silver over the medium term, according to the latest commodities analysis from StoneX Bullion.
The analysts noted that gold prices rose to $2,050 on the back of “a potentially softer path for the Fed’s rate cycle” combined with “increased tension in the Middle East” following U.S.-led strikes on Houthi targets in Yemen.
“This was at the end of the second week of January; thereafter spot prices lost $50 in the space of two trading days as the dollar strengthened and retail sales were a lot higher than the markets had been expecting at 0.6% (5.6% year-on-year), especially at the core level (excluding food service, gas, building material and the auto sector), which posted a 0.8% gain (also 5.6% Y/Y),” they said, noting surprisingly strong performance from autos, along with clothing and department stores, which they cautioned may have had a ‘Christmas effect.’
Gold technical, six months view; mixed. Spot is below the 20D MA, above the others. MACD (a key short-term indicator) still negative
Source: Bloomberg, StoneX
“Either way it was enough to take some heat out of the gold market, demonstrating that while the tailwinds are still strong for gold, the market is not aggressively bullish,” the analysts said.
Turning to silver, StoneX sees the gray metal playing “a contrary game.”
“Although the long-term outlook for silver demand is very strong, driven particularly by the onward march of the solar industry (especially in China) and vehicle electrification, sentiment overall is still very cautious on the back of economic uncertainty and gold’s stuttering performance,” they wrote. “As a consequence, since our note of a fortnight ago silver prices showed little inclination to follow gold higher and with the exception of a short-lived jump from $22.50 to test $23.50, prices have been on a downward trajectory.”
Silver technical; uptrend severed, and the moving average conformation is bearish, as is the MACD
Source: Bloomberg, StoneX
They noted that the gold:silver ratio has widened considerably in recent days, “running up from 89.0 to 91.3 in just two days to post the highest since early September 2022, when gold was part of the way through a ten-week bear run from $2,070 to $1,650 and silver was hovering below $21.”
Looking at the precious metals ETP sector, the analysts noted that latest World Gold Council numbers show a drop of 244 tons of gold holdings in 2023, totaling $14.7 billion, to 3,226 tons, and the decline appears to be continuing into the new year.
“World mine production is roughly 3,650t. The Council’s tonnage numbers for this year so far only go to 5th January and show holdings of 3,185t, implying a drop of 41t,” they wrote. “Bloomberg numbers for the following fortnight suggest a further fall amounting to 23t with only two days of net creation from a total of ten.”
Gold spot price vs ETF holdings
Source: Bloomberg, StoneX
StoneX said that silver ETPs have been under pressure this year as well, which was not surprising considering the recent price declines. “Of eleven trading days so far, only four have seen net creations, for a drop of 170t to 21,600t,” they said. “Over 2023 as a whole the silver ETPs dropped from 23,296t to 21,770t (world mine production is approximately 26,500t). This was therefore a fall of 1,526t, equivalent to three weeks’ global mine production.”
Silver spot price vs ETF holdings
Source: Bloomberg, StoneX
The futures markets have also been negative toward both metals in 2024. “From the start of the year through to 16th January gold and silver have both been under a cloud on COMEX,” they said. “Gold has seen a drop of 73t (17%) in outright longs over the period, notably the first week, while outright shorts have nudged almost imperceptibly higher, rising by 5% and leaving the net position at 259t long against a 12M average of 222t.”
Gold COMEX positioning
Source: CFTC, StoneX
The situation for silver was worse still. “Silver was more aggressive with a 21% drop in long and a 13% increase in shorts, taking the net long position from 2,581t to 1,000t, and compared with a 12M average of 1,603t,” the analysts noted.
Silver COMEX Positioning
Source: CFTC, StoneX
“At end-2022 gold was showing a net long of 158t and at end-2023 that position was a net long of 218t; the silver net long had been 4,632t and by end-year was down to 2,700t, demonstrating silver’s lack of attraction last year compared to gold,” they said. “For the time being silver is still under something of a cloud.”
Spot silver has seen a strong rebound on Tuesday, last trading at $22.451 per ounce, up 1.60% on the session, while spot gold has held steady, last trading at $2,028.66 per ounce for a gain of 0.35% at the time of writing.
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