Recent upheavals and further decompositions in geopolitical relations between already sour neighbours, continue to force investors to divert more flows towards safe-haven assets, which propels them swiftly to higher ground.Gold has been the main beneficiary of these aforementioned escalating tensions, which fuel its rise to new uncharted all-time high territory, yet some traders apprehend the move as a technical overextension and look elsewhere for a more viable and affordable alternative.
Silver may just do the trick. In this report we aim to shed light on the catalysts driving both the bullion’s and silver’s price, assess their future outlook and conclude with a technical analysis of the latter.
Flaring geopolitical tensions stoke fears
Investors worldwide have been steadily and wisely allocating more and more capital of their portfolios into safe haven assets over the past year or so, as unresolved geopolitical tensions on multiple fronts across the globe agitate investors, leading them to extrapolate that further escalations are more likely to materialize, rather than smooth diffusions. Even though the ongoing Russia-Ukraine and Israel-Hamas wars, do not have, and thankfully so, the same magnitude of, mobilizations, scope and catastrophic consequences that the Second World War did, recent statistics showcase, that the global community is more divided than ever.
As a matter of fact, according to the Geneva Academy of International Humanitarian Law and Human Rights organization, a record number of ‘isolated’ conflicts are well underway to date, and create fractures on the so-called global political homogeneity. There are currently, over 110 ongoing armed conflicts across the globe, predominantly taking place in regions such as the Middle East, alongside the African and Asian continents, and involve countries such as Syria, Afghanistan, Yemen, South Sudan, Nigeria, Mali, Burkina Faso, Myanmar, amongst others.
At the same time, political dialogue between other nations systematically deteriorates and with no apparent diplomatic solution emerging in the horizon, geopolitical analysts have no choice, but to abstract and project that other disputes, may also arise in the near future, whether that is between Venezuela and Guyana, Iran and Israel or between China and Taiwan, and runs the risk of dragging into the mix other players, such as the United States.
This evident multipolarization, alongside the increasing intolerance against healthy competition between foes, could lead the world down into dark alleys, which is precisely what creates this urgency from investors to protect their belongings, such as gold, by piling into safe haven assets, in fears of a destabilized global international security.
Silver as an affordable alternative?
From a gold financial standpoint, the bullion has become investors’ instrument of choice for diversification, evident from the ludicrous rally which continues still to propel the shiny metal to fresh all-time highs, session after session, but in recent days, silver has attracted flows itself, possibly serving as another viable alternative for risk management and safekeeping tool in the hands of investors.
Silver futures have already recorded an impressive 8% gain since the start of April and have broken above the $27 per oz level in today’s session, hitting 2 ½ year highs. Should fear and grim outlooks for escalation of tensions continue to flood the market, more flows towards the bullion shall be expected, which could indirectly drive silver’s price to higher ground due to the complementary relationship that the two safe haven assets possess.
Gold Technical Analysis
XAUUSD H4 Chart
- Support: 2145 (S1), 2115 (S2), 2090 (S3)
- Resistance: 2195 (R1), 2220 (R2), 2250 (R3)
Looking at XAGUSD Daily Chart we observe that silver managed to break past a long-standing resistance level near the $26.80 level, which now acts as support, and has ventured into territory last seen before in over 2 and half years, relatively unobstructed, within the span of two days.
We hold a bullish Gold outlook bias for the commodity given the recent breakout and supporting our case is the RSI indicator below our chart which currently registers a value of 71, indicating strong bullish tendencies. Furthermore, MACD confirms the strength and direction of silver’s move, highlighting that the bulls have strong momentum on their side. The fact that both the MACD and the signal line, formed a higher low, sufficiently far away from the zero line, after a short-lived pullback, adds more confidence to our case.
Should the bulls remain in control, we may see the break of the $27.70 (R1) resistance level and price action heading closer to the $28.40 (R2) resistance level, which is an area last visited in June of 2021. On the other hand, the bears find enough resolve, we may see silver dipping below the $26.80 (S1) closest support level and head for the $26.20 (S2) support base. Should excess selling pressure take place and we observe the price action breaking below the ascending trendline incepted at the beginning of March, then the $25.50 (S3) may act as the next area of support.
Penafian: This material is for general informational & educational purposes only and should not be considered as investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked, in this communication.
