July 30, 2021<\/p>\n\n\n\n
July 30 (KWN) \u2013 Alasdair Macleod: Following the demise of gold\u2019s active August contract, gold and silver had a better week. In European morning trade, gold was at $1829, up $28 from last Friday, while silver rallied to $25.60, up 45 cents.<\/strong><\/p>\n\n\n\n As always at the month-end, the bullion banks had an interest in seeing prices lower, so that call options expired worthless and in the hope that short-term speculators would trade these factors, giving added downward impetus to prices.<\/strong><\/p>\n\n\n\n Following a pause on Wednesday, the change came yesterday when gold rose over $20 and silver by 56 cents. Until then, positive sentiment had deteriorated, probably the lowest seen for some time, lower even than at the end of June when gold tested the $1750 level. And in silver, the unwinding of small investor interest in SLV, which momentarily drove silver to touch $30 on 1 February, has brought back some liquidity into the market \u2014 enough to encourage bullion banks to shake some more silver out of loose hands.<\/strong><\/p>\n\n\n\n This left the gold\/silver ratio to 71.5 this morning, which is our next chart.<\/strong><\/p>\n\n\n\n Gold\/Silver Ratio Preparing To Break Below 60<\/strong><\/p>\n\n\n\n Having nearly halved from the 20 March 2020 peak, the upper sixties proved to be resistance to further falls. While there is no knowing when that resistance might be overcome, we can conclude that when it is the bullish move for silver relative to gold is likely to be significant. And the lesson from yesterday\u2019s trading, when silver was up 3% at one point tells us that futures traders are short enough to be badly squeezed.<\/strong><\/p>\n\n\n\n But with some physical liquidity being recovered in London, the direction will probably come from gold, and it has been noticeable in the market how gold held up relative to silver, perhaps confirming relative liquidities. That said, excess silver liquidity tends to dry up in a flash.<\/strong><\/p>\n\n\n\n On fundamentals, this week saw the release of the Fed\u2019s FOMC July minutes, another factor that nailed the timing of precious metal price recoveries to late this week. Ahead of it, buyers held off, amid rumours that the Fed might say something about tapering, given the sudden rise in official price inflation figures. Instead, the FOMC remained firmly in denial of these factors, maintaining the funds rate at 0-0.25%. It was an exercise in justifying no change.<\/strong><\/p>\n\n\n\n For bond markets it was all one big yawn. But the dollar\u2019s trade-weighted index slipped noticeably, helping to underwrite gold and silver, along with some key commodities such as copper. The dollar\u2019s TWI is next.<\/strong><\/p>\n\n\n\n