Following last week's big sell-off, gold and silver have both managed to cling on to their respective key support levels as investors weigh conflicting macro factors. With the recent rebound in bond yields, the outlook on the metals have become a little uncertain, but I am still of the view that both will rise further over time. Precious metals should continue to receive tailwind support from the ongoing flood of cheap central bank money.
Out of the two metals, I am more bullish on silver than gold:
As the year progresses, I expect the global economy to recover with the rollout of COVID-19 vaccines. This should help to boost industrial demand for silver (and other base metals).
What's more, many countries are moving towards cleaner energy and away from fossil fuels for their energy needs.
Silver is used in solar panels, so it is natural to think that there will be growing demand for the metal in the long term.
Copper, meanwhile, is a key component in the construction industry. It is also used in clean energy, with wind, solar, batteries and electric cars all using the metal in electric wiring.
So this industrial metal should also perform well in the long-term.
From a technical point of view, I am encouraged to see some positive signs for both precious metals.
Gold has managed to hold its own above the still-rising 200-day moving average – but needs to show further strength to signal demand is strong:
TradingCandles.com and TradingView.com
Silver, meanwhile, has managed to hold above the breakout area of $25ish:
TradingCandles.com and TradingView.com
If silver now manages to break and hold above 25.70ish resistance, then a move towards the recent highs should be on the cards next, potentially ahead of a bigger move thereafter.
However, if the metals were to break their respective long-term bullish trend lies, as shown on the charts, then at that point I will have to drop my near-term bullish view on the metals.
