No doubt every trader in the market at this week’s start noticed the sudden surge in commodity prices. Precious metals like Gold and Silver in particular have gained an exorbitant amount over the past month. But are their price movements on par with one another?
Looking at the fundamental side, the tensions spreading across the Middle East and North Africa have indeed carried a high impact on commodity prices; Gold and Crude Oil especially. Oil’s price rise appears in line with the safe-haven Gold, but fundamental factors affecting the speculation of oil supply disruptions are more likely behind Crude’s latest price moves and may be more sharply affected by developments in the region.
Gold and Silver, on the other hand, are affected not only by risk flight, but also technical speculation, as well as industrial demand, in the case of Silver.
The difference between these latter two is particularly interesting for traders. Whereas Gold has a large market of buyers and sellers, the Silver market is relatively thin, leading to higher volatility in silver trading.
Gold’s rising price was fueled by a large market of technical buyers who have been purchasing on dips following the break past $1340 per troy ounce. Silver, however, has breached its 30-year high price level, meaning there is little technical data a trader can base his/her trades on from reviewing the charts.
The lack of historical resistance lines above where Silver currently trades, as well as the thin market of Silver traders, means Silver prices possesses an above-average tendency to become overextended. Silver is also tied with electrical component industries as well as solar panel producers, which have seen rising profits over the past few years on recent hi-tech surges and energy diversification, respectively.
Gold prices are approaching the strong historical resistance level of $1420 an ounce, but Silver has no such historical line in sight. Analysts are using this information to anticipate a bullish run in Silver prices over the next week or two, whereas Gold may find resistance relatively soon and dip back down towards the $1340 price level.
