empty
28.02.2022 06:08 PM
Gold and other precious metals ready to take off?

Hi, dear colleagues!

Following the good old tradition, we discuss the outlook for gold and other precious metals at the end of each month. Importantly, you are probably aware that growth in gold price sets the stage for the rally of precious metals. Palladium used to be an exception a few years ago because it is a low liquidity metal. So, its growth was caused entirely by demand for the auto manufacturing industry. In other words, precious metals always follow the gold dynamic at a different pace, albeit in the same trajectory. It makes sense to execute trades in opposite direction on condition you have excellent skills of arbitrage strategies. The common rule is that positions should be opened in the same direction.

Let me remind readers of the main constituents of supply and demand for gold that make a direct impact on growth or decline of gold price. The prime factor to influence gold in the short term is demand from American exchange-traded funds. The factor of secondary importance is demand from speculators trading on COMEX. In the long term, gold is sensitive to demand from the jewelry industry, investments in gold coins and bullions, and gold purchases by central banks. Demand from the high-tech sector doesn't make a significant impact on the price due to a minor 10% share in the total gold consumption.

Among other factors to make a direct impact on market quotes are developments on forex, risk-on or risk-off mood among global investors, yields of US Treasuries, inflation expectations, and a series of other little known factor such as seasonal price fluctuations. Speaking about seasonal fluctuations, multi-year research shows that gold commonly clicks into gear roughly from mid-March. The metal usually trades lower at the end of February.

This image is no longer relevant

Picture 1. Demand for gold from exchange-traded funds

Now let's figure out the factor of major importance for gold. According to research by World Gold Council made in January 2022, US investors purchased 49 tons of gold in ETFs in the amount of $2.9 billion. It has been the biggest purchase since August 2020. Such a background gives us the hope for a growing investment interest driven by high inflation, geopolitical risks, and other unfavorable factors existing for the time being.

There is one more factor to encourage growth of gold prices nowadays. This factor is the sanctions imposed by the West against the Kremlin. By turning off the SWIFT system and freezing its assets, the United States and its allies did not leave the Bank of Russia the opportunity to purchase traditional assets denominated in dollars, euros, yen and pounds to replenish reserves. The current pushes the Russian regulator to accumulate reserves by buying gold and Chinese yuan. Moreover, in the future, it may be necessary to do this in much larger volumes than it was before, when the central bank bought out all the gold produced in Russia. The appearance of such a major player, hypothetically, could lead to an increase in demand, and hence to a significant increase in the price of gold.

This image is no longer relevant

Picture 2: Graphic analysis of COT report

The COMEX-CME exchange is also seeing positive changes. The latest COT reports show a sharp increase in open interest, which is an indicator of supply and demand. In just 4 weeks, the number of open positions increased from 637K to 809K contracts. The indicators of the total interest of speculators from the Money Manager group increased from 63K to 161K contracts, which was the highest value since November 2021 and signals the potential for further growth (picture 2)

This image is no longer relevant

Picture 3: Technical analysis of gold

However, when it comes to potential growth, we need to isolate our thinking from the mind trap when our brains want something hypothetical to be real. This is very important, especially in the context of the fact that even knowing the direction, we often do not have an entry point and cannot open a position, just because we do not have exit points. In other words, we cannot make a decision without technical analysis, so let's look at technical analysis (picture 3).

The main point that traders and investors need to pay attention to is the price break above the resistance at $1,875, which has now become support. The rapid growth of gold to the level of $1,980 ended with equally rapid sell-offs. Now it is testing support from above, from where growth can begin again. However, the point for placing a stop order is now no higher than $1,780, which means a risk of $110 per contract. In turn, it means that the upside potential should be at least $200 and will be at the level of the previous all-time high reached by the price in August 2020. This is a feasible scenario, so long positions for this purpose are possible, but are more suitable for investors who rely on long-term holding the asset.

However, if we talk about trading, the current price level seems a bit high to me, and the stop order size is quite large. Thus, traders need to wait for the formation of a new low to place a stop order. Perhaps such a low will appear as early as this week.

This image is no longer relevant

Picture 4: Technical analysis of platinum

As it was said at the beginning of this article, other precious metals, platinum and silver, follow gold. In this context, from a technical point of view, in my opinion, the most interesting is platinum, which exceeded the $1,100 mark last week, but failed to gain a foothold. At the moment, platinum is testing support at $1,050. If there are signals, you will be able to buy an asset with a target of $1,300 and placing a stop order at a value not higher than $990. Be careful and follow the rules of money management!

Daniel Adler,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Alexandr Babenko
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Market fears nothing

The S&P 500 reached another all-time high, with rotation being the hallmark of the US equity market. Investors are aggressively buying up stocks that underperformed in the first half

Marek Petkovich 10:50 2025-07-11 UTC+2

What to Watch for on July 11th? A Fundamental Overview for Beginners

There are very few macroeconomic publications scheduled for Friday, but the volume is still greater than on any previous day this week. The UK will release GDP and industrial production

Paolo Greco 08:50 2025-07-11 UTC+2

GBP/USD Overview on July 11, 2025

The GBP/USD currency pair failed to consolidate above the moving average on Thursday, so the correction continues for now. Throughout Thursday, the GBP/USD pair was unable to hold above

Paolo Greco 07:15 2025-07-11 UTC+2

EUR/USD Overview on July 11, 2025

The EUR/USD currency pair spent Thursday calmly drifting lower. We continue to wait for the current correction to end and for the uptrend to resume. To be fair, this correction

Paolo Greco 07:08 2025-07-11 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are maintaining positive momentum for the second consecutive day. Ongoing uncertainty surrounding U.S. President Donald Trump's trade policy and its impact on the global economy continues to weigh

Irina Yanina 19:24 2025-07-10 UTC+2

USD/CHF. Analysis and Forecast

Today, the USD/CHF pair retraced part of its decline from a new weekly low recorded during the Asian session and has temporarily paused its downward movement, stopping short

Irina Yanina 12:26 2025-07-10 UTC+2

Market dupes sellers

The split within the Federal Reserve, NVIDIA's successes, and a successful auction of 10-year US Treasury bonds allowed the S&P 500 to ignore the tariff chaos. Donald Trump announced tariffs

Marek Petkovich 12:02 2025-07-10 UTC+2

What to Watch on July 10th: Fundamental Event Overview for Beginners

Macroeconomic Report Analysis: There are very few macroeconomic publications scheduled for Thursday, and none of them are expected to be significant. So what could traders focus on today? The second

Paolo Greco 09:07 2025-07-10 UTC+2

GBP/USD Overview on July 10, 2025

On Wednesday, the GBP/USD currency pair maintained its downward movement, which is corrective in nature and could end at any moment. The price remained below the moving average line

Paolo Greco 07:26 2025-07-10 UTC+2

EUR/USD Overview on July 10, 2025

The EUR/USD currency pair continued to trade very calmly on Wednesday. The pair maintained a slight downward bias, as we've noted in all of our recent articles. However, the current

Paolo Greco 07:16 2025-07-10 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.