Podcast: Play in new window
This week, gold and silver saw their first major pullback in months, with gold taking a 3% step back and silver down 8.5%. The move does not appear to be due to any change in the underlying fundamentals and instead is driven by profit-taking and rising CME margin requirements.
Let’s take a look at where prices stand as of Wednesday, October 22:
The price of gold is down 3% to $4,100 since our recording the prior week. From high to low, gold had about an 8.5% move intraweek.
The price of silver is down 8.5% sitting at $48.50. Over the whole week, silver had a bigger swing of as much as almost 13% from high to low.
Platinum is down 7% currently sitting around $1,600 from a week earlier. The white metal has a total massive volatile move from top to bottom, of over 16% from this past week.
Palladium is down 5% sitting at $1,500 over the last week. It also had a wild swing intraweek of about 18% from top to bottom.
Taking a look over at the paper markets…
The S&P 500 is up about 0.1% sitting at 6,700. The index has a bit of a bounce after having a significant decline of 3% in a single Friday a couple of weeks ago.
The US Dollar index is up 0.3%, sitting just below 99.
Technical Indicators Point to Healthy Corrections
Precious metals touched key technical support levels like the 20-day moving average, and Fibonacci retracement levels such as the 38.2%, which historically provide buying floors within bull markets. The 50-day moving averages also remain well below current prices, suggesting room for the market to stabilize and continue its advance after this pause.
Gold-to-Silver Ratio Remains a Critical Indicator
The gold-silver ratio recently fluctuated around 84 to 85, after peaking above 104 earlier this year. Historically, when this ratio breaks above 90, it signals strong upcoming silver performance. This makes the ratio a key indicator for those of us who practice ratio trading—moving between gold and silver to maximize gains. Watching and acting on this indicator with discipline can make a big difference.
Physical Metals vs Paper Markets
The price moves in futures markets or ETFs can be wild, driven by leverage and large institutional traders. But if you hold physical metals, like gold or silver coins and bars, your game is different. Physical metals come with wider spreads and less liquidity, so focusing on long-term strategy rather than daily price swings is crucial. Have a plan, know your exit strategy, and don’t let emotions drive your decisions.
Supply Dynamics Are Still Favoring Metals
There are signs of tightening supply, especially in silver, with delays in deliveries and refinery bottlenecks continuing. This adds a layer of fundamental support to prices beneath the short-term volatility. Changes in margin requirements by exchanges may cause short-term price pressures but essentially aim to temper speculative excess rather than undermine the metals themselves.
If you’re invested or considering adding precious metals, now could be an excellent time to evaluate your strategy. Expect these kinds of pullbacks—we see them as buying opportunities when prices hit support levels. Steady discipline and patience will serve you better than chasing price moves.
Here to help
If you’d like to discuss your personal approach or explore ways to add physical precious metals to your portfolio, reach out to us at McAlvany Precious Metals. We’re here to help you navigate the exciting but sometimes turbulent journey of precious metals investing. Please reach out to us at 800-525-9556.
