Gold and silver have been steadily finding buyers since late September, pushing back from multi-month lows. Interestingly, at the same time, long-term interest rates continue to move upwards. Previously, rising bond yields acted as a factor for selling precious metals, paying no dividends or coupons.
In our view, investors have viewed inflation differently since the end of September. They see inflation as less transitionary than before: neverending supply chain problems, high energy prices, and accelerating wage growth amplify pro-inflationary factors.
Under these conditions, hedges against long-term inflation in cryptocurrencies and precious metals are regaining their shine. In addition, the latter have sagged substantially in more than a year of corrective trend.
On the 29th of September, we saw the final chord of the sell-off, which simultaneously affected bitcoin, gold, silver, and gold mining stocks. The next day, there was buying interest, sustaining until today. Admittedly, on a very different scale for different instruments.
Bitcoin has rallied over 60% from the bottom in late September, taking the price to an all-time high of $67,000 on Wednesday. Shares of the biggest gold miners are up around 10-15%. Silver jumped 12.5% during the same time: three times as much as gold with its 3.6%.
In terms of tech analysis, investors should pay attention to the fact that the bulls have managed to push metals and mining companies above their 50-day moving averages. This is the first sign of a break in the downtrend.
Potential buyers should pay attention to the lines of the 200-day moving averages for gold, silver, and related mining stocks. A sustained overcoming of $1800 per ounce of gold still acts as an important point to watch. A strong move above the indicators would signal that we do not see a rebound developing but a new cycle of rising gold prices.
Amongst the fundamental factors, a divergence between inflation expectations and the actions of the key central banks could provide support to the commodity markets. Signs that central bankers are not keeping pace will support a recovery rally in gold and help mining companies to increase their revenues and profits.