GOLD CONSOLIDATES: BUT FOR HOW LONG? / MACLEOD FINANCE

Gold consolidates: but for how long?

Perhaps global economic ills will be put on pause for the summer. But the entire investment world will be looking for the dip to buy the best performing asset of recent months — GOLD

ALASDAIR MACLEOD

In a continuing consolidation, gold and silver sold off this week. 

In European trading hours this morning, gold was $3206, down $74 from last Friday’s close and silver at $32.25 was down only 43 cents. 

The gold/silver ratio is back under 100 at 99.4.

As proof that western capital markets no longer determine gold and silver prices, declines this week have been during Far East trading hours. 

While trading on the Globex facility by Westerners cannot be ruled out, the fact that moves happen during Shanghai trading hours should be noted. 

And while SGE physical deliveries have increased (153.05 tonnes in April v. 120.16 in March) it would appear that leveraged futures in Shanghai are causing some market indigestion.

Meanwhile, attempts by the swaps on Comex to take prices meet resistance. 

For example, yesterday gold was hit down to $3124 before rallying to close at $3240, a $116 turnaround.

Stand-for deliveries on Comex continue apace. 

So far this month, we’ve seen 13,265 gold contracts stood for delivery, which is 41.2 tonnes. 

And 3,484 silver contracts, which represents 541.8 tonnes.

Warehouse statistics show silver stocks close to all-time highs at 501,750,232 ounces, but gold stocks have definitely peaked.

It’s difficult to assess at this point whether the consolidation in gold and silver prices has further to go. 

The technical chart suggests that gold would look healthier if the long-term moving average was allowed to catch up with the price:

Gold has found support consistently at the 55-day moving average, but it is still far above the 1-year MA currently at 2,701 but rising strongly. 

Technical analysts would argue that a dip to $3000 over the summer would probably find firm support while allowing the 1-year MA to catch up. 

However, the outcome is likely to be driven by currency and economic events.

Technically, silver looks more promising, being less extended in its bull market:

This chart is just looking for an excuse to go much higher. 

So, what are the economic developments likely to cause silver to outperform gold?

Perhaps the clue is to be found in President Trump being increasingly sidelined with respect to tariffs. 

Scott Bessent, the Treasury Secretary reassured capital markets by negotiating more reasonable tariffs with China, if only for 90 days. 

That takes us into August, during which time a longer-term agreement might be negotiated.

In other words, it is a case of wait and see, likely to be reflected in the dollar/gold exchange rate. 

With this pause probably comes a deferment of recessionary fears, which would justify silver’s stronger technicals.

That said, the investment world has been alerted to the prospects for gold. 

And while equities could continue to rally — depending on bond markets — severely underweight investors will be looking to buy into gold’s dip. 

Surely, they will be praying for a pullback to $3000…

A stronger technical base would support a move to the $4000 level, being touted by some of the large banks — JPMorgan sees that by Q2 2026. 

But there are some signs that bond yields are increasing. 

The 40-year JGB is particularly striking:

So is the long end of the UK gilt market.

Others, such as German bunds and US Treasuries show similar patterns, which analysts are ignoring. 

But they are the sown-seeds of the next credit crisis, crashing equities and likely fiat currencies with them.