Silver, U.S. Dollar Are Catalysts To Drive Gold Prices Higher - Hecht
(Kitco News)- With the precious metals stuck ina near-term trading range, one commodity analyst continues to watch silver andthe U.S. dollar as the two catalysts to drive prices higher in the short term.
In a report published by SeekingAlpha, Andrew Hecht, creator of the Hecht Commodity Report, wrote that the U.S.dollar has been in a downtrend since early 2017 and there are signs that thecurrency is entering a long-term bear market.
“The long-term trading pattern ofthe currency suggests that we are just in the second year of a bear market thatcould last as long as seven years,” he said in his commentary. “If the patternholds in the dollar and when it comes to the inverse correlation with preciousmetals prices, we could look forward to more than five years of a dollar bearand gold, silver, and platinum bull run.”
In particular, Hecht said that heexpects silver to be the spark that ignites the broad market rally. Hecht notedthat there are technical signs pointed to an end in the white metal’sconsolidation phase. He added that silver prices need to break through key resistanceat $18.16 an ounce.
“If silver were to rise abovethat level, it would likely carry the other precious metals to new heights,” hesaid. “It is likely that gold... is waiting for a signal from silver before itmakes a move and climbs above the technical level and the $1,400-per-ouncebarrier.”
Both gold and silver have beenstruggling lately as the markets face an impending interest rate hike nextweek. Silver continues to underperform gold prices as the gold ratio onKitco.com continues to trade near multi-year highs, around 80 points.
April gold futures last traded at$1,323.30 an ounce, down 0.29% on the day, while May silver futures last tradedat $16.55 an ounce, down 0.46% on the day. Many technical analysts see $17 anounce as an essential level that silver needs to overtake to regain investorinterest.
According to many commodityanalysts, markets are in a holding pattern, waiting for more clarity regardingthe trajectory of further U.S. interest-rate hikes in 2018. In its Decemberprojections, the Federal Reserve forecasted that it sees three rate hikes thisyear; however, expectations are starting to grow for four rate hikes.
Despite these growing hawkishexpectations, many economists have noted that the current economic data and theongoing threat of geopolitical uncertainty do not support aggressive monetarypolicy action this year.
According to some commodityanalysts, gold and silver could push higher next week if the Federal Reservemaintains its forecast for three rate hikes. Less hawkish action from the Fedwould also provide little support for the U.S. dollar, which is struggling tomake gains against a basket of global currencies.
The U.S. dollar index last tradedat 89.78 points, relatively flat on the day.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.