Precious metals stuck between a rock and a hard place

Precious metals remain trapped between a rock and a hard place. On the one hand, the falling bond yields and the recent stock market weakness should be good news for the so-called safe-haven assets. On the other hand, concerns over economic growth is lowering expectations over physical demand for the metals. This is especially the case for industrial metals such as copper. But as silver also has some industrial uses, demand concerns have also kept the gains for the grey metal in check. The US dollar meanwhile is reluctant to sell-off despite the Fed's U-turn from being a hawkish to a dovish central bank. This is because other major central banks are also dovish at the same time, keeping foreign currencies undermined. So, precious metals prices remain finely balanced as market participants weigh the above fundamental considerations. Overall, though, conditions remain supportive for both gold and to a lesser degree silver to stage a rally. We need to see further price action and some technical confirmation to increase our conviction that gold and silver are indeed headed higher. The fact that gold has held key support around the $1275-85 area is bullish, as the move below the long-term pivotal $1300 hurdles proved to be temporary (at least for now, anyway).

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