Silver’s Bullish ‘Golden Cross’; Morgan Stanley Like Silver In Q4 and 2013

Published in Market Update  Precious Metals Update  on 2 October 2012

By Michael O’Brien


Today’s AM fix was USD 1,778.50, EUR 1,377.19, and GBP 1,100.56 per ounce.
Yesterday’s AM fix was USD 1,770.50, EUR 1,372.80 and GBP 1,096.01 per ounce.

Silver is trading at $34.80/oz, €27.06/oz and £21.66/oz. Platinum is trading at $1,673.00/oz, palladium at $643.00/oz and rhodium at $1,125/oz.


Silver's Golden Cross – (Bloomberg)

Gold rose $3.60 or 0.2% in New York yesterday and closed at $1,776.90. Silver surged to hit a multi month high of $35.367 before it edged down, but it finished with a gain of 0.58%.

Gold edged up on Tuesday, nearing the 11 month high hit in the prior session. Gold and silver are being bolstered by concerns about the dollar, the euro and fiat currencies.


Silver 6 Months Daily – (Bloomberg)

Many analysts predict more central banks will follow the ECB, US Fed and BOJ and increase ‘stimulus’ measures for their economies, flooding the market with cash. This global debasement of currencies will continue to benefit gold and silver bullion.  

Today, the Reserve Bank of Australia decreased interest rates to 3.25% due to weaker economic growth. The Aussie dollar fell against all major currencies and especially against gold – falling to AUD 1,727/oz. 

Deutsche Bank research published overnight said "we believe that expanding monetary conditions globally will provide the catalyst for higher gold prices over the near-medium term”.  

Deutsche Bank has a price target which exceeds $2,000 for gold in the first half of 2013 due to “supply constraints”.

Amplats a top platinum mining company said yesterday that it would fire all strikers who did not attend disciplinary hearings the following day as an illegal strike continued at four of its South African mines.


Silver 2 Years Daily – (Bloomberg)

Silver has now joined gold in experiencing a “golden cross” which likely portends much higher prices in the coming months (see chart above). 

A golden cross is when the 50 day moving average rises above the 200 day moving average in an upward movement. The golden cross suggests that silver prices are going higher as golden crosses normally lead to higher prices.

In the past quarter, silver surged 25% in a move that has been largely attributed to the Federal Reserve's announcement of so-called QE3.

“QE to eternity” is obviously an important factor but the supply demand fundamentals of the physical silver market remain very favourable and this should see silver rise above the recent record nominal high of $48.44/oz either in Q4 2012 or in 2013.

Technical indicators such as MACD, RSI and STO show that silver is slightly overbought short term.

However, silver can remain overbought in the short term as was seen in silver’s rally in 2011 when silver nearly doubled by surging from below $27/oz to nearly $50/oz in just 3 months - from January 27th 2011 to April 28th 2011.

Morgan Stanley has said that it believes silver will outperform gold in the coming quarters.

“Silver has outperformed gold since speculation over QE3 (a third round of U.S. quantitative easing) emerged in early September,” Morgan Stanley said in its weekly commodities report.

“While the risk-on rally in the first quarter of the year underpinned a strong performance from silver, uncertainty in global macroeconomic policy steered investors toward gold in 2Q and 3Q. For the next several quarters, however, we think silver will again outperform gold….”

Silver’s inflation adjusted high of $150/oz remains our long term price target.

NEWSWIRE
(Bloomberg) -- Supply Constraints May Boost Gold, Platinum: Deutsche Bank
The 2013 forecasts were raised 1% for zinc and 3% for gold and silver. The DB iron ore price expectation was lowered 18% for 2013 to $116/t. Copper and nickel will outperform as lead and aluminum lag.

For breaking news and commentary on financial markets and gold, follow us on Twitter.


Cross Currency Table – (Bloomberg)

NEWS
Gold inches up on weaker dollar; central banks eyed - Reuters

Gold Set to Gain for Second Day After Fed Renews Stimulus Pledge – Business Week

Gold prices ease back in European trading – MarketWatch

Deutsche Bank lifts 2013, 2014 gold-price outlook - MarketWatch

COMMENTARY
PIMCO On Gold - The Simple Facts – Zero Hedge

Bullish Call: Silver Could Hit $50 by End of Year - Bloomberg

Ferguson Not Bullish on U.S. Economy Prospects - Bloomberg

Gold is good money - that's why governments hate it – Mineweb

Sinclair: Gold will soar when you sell
– Jim Sinclair’s MineSet


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