The precious metal complex (gold, silver, platinum and palladium) traded under pressure, while all futures contracts of precious metal closed sharply on the day. Silver futures contracted the largest withdrawal, with the most active March contract losing $ 2.70, down 9.17% and currently set at $ 26.71. This action follows the decision of the Chicago Mercantile Exchange (CME) to increase the required margin to trade a single contract of Comex silver by 18%. The former margin requirement of 14,000 per 5,000 ounces per Comex contract to $ 16,500.
As the precious metals have traded dramatically higher over the past three trading days, the CME Group’s effort to increase the margin requirements of silver futures contracts is a normal response to increased volatility. It is the stock market that guarantees the performance of any placed trade. The exchange ensures that winners are paid and facilitates this by debiting the traders’ accounts that are suffering losses.
Silver’s dramatic decline came after a three-day rally in silver futures raised its price from Thursday, January 28, to a low of $ 24.92 to a high of more than $ 30 per ounce with a settlement price of more than $ 29 per ounce we increased yesterday.
Did Silvers deteriorate resulting in significant technical damage?
Based on our technical studies, silver did no major damage to the map. Although today’s decline was 9% severe, silver remains above all three major moving averages; the moving averages of 50, 100 and 200 days. It also remains above the long-term Fibonacci retracement of 23%. The data used for this Fibonacci retracement is a long-term study that began in mid-March 2020 when silver prices traded below $ 12 per ounce, to the peak of August 2020 when silver unsuccessfully flirted with $ 30 per ounce. The same strong resistance level that appeared at $ 30 in August last year is still a technical point of great resistance. The golden cross identified on January 21 between silver moving average of 50 and 100 days remains intact.
At the same time, the gap or price gap created from the end of Friday last week. The dramatically higher price that occurred when the markets traded in Australia again on Monday morning has been filled. Most market technicians believe that the gap or price gaps are likely to be filled. If these gaps occur during a clumsy rally, it is not uncommon for prices to fall to fill the gap.
Gold closes below its 200-day moving average.
On a technical basis, however, gold suffered damage today as it fell 1.36% or $ 25.40, with the most active Comex contract in April 2021 currently set at $ 1838.50. This places current prices below all three major moving averages (50 100 and 200 days). Today’s decline also puts the current price just below the Fibonacci retracement of 38.2%, which is taking place at $ 1843.30. The timeline for the dataset used for the Fibonacci retracement is the same as what we used for silver. It started when gold traded at a low of $ 1443 in mid-March last year, reaching the new record high of all times reached in August 2020 when gold reached $ 2088 per ounce.
Although gold prices have suffered a major setback on a technical basis, the principles for price support are still extremely strong. The Federal Reserve has an extremely accommodative monetary policy, including near-zero interest rates and quantitative easing. Combined with the $ 4 trillion in fiscal spending last year and President Biden’s current proposal to launch another round of stimulus, which will add an additional $ 1.9 trillion to national debt, a case could be directed at strong fundamental support of the precious metals complex including gold and silver prices.
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