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The Technicals: Something Else is Driving Gold

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This analysis attempts to look at different metrics to understand the current momentum in the gold and silver markets. It is meant as an analysis of potential price direction in the very short term (1-2 weeks).

In the analysis below, the price indicators suggest the correction has more to go, but some of the less-watched metrics indicate the correction could be much shallower. Given the data as shown below, the latter seems more likely which means the correction may have run most of its course at this point.

Price Action

Both metals saw very large rallies since the start of March which came to a sudden and much-needed break on April 19th. The correction has been fast and strong. The chart below shows that both metals have further to fall to test both support levels which are around $26 in silver and $2100 in gold.

Outlook: Bearish

Figure: 1 Gold and Silver Price Action

Daily Moving Averages (DMA)


Gold definitely got ahead of itself and now sits way above both the 50 and 200 DMAs. Based on the chart below, the best case would be sideways action until the moving averages catch up, but the more likely scenario is a further pullback.

Outlook: Bearish

Figure: 2 Gold 50/200 DMA


Silver is following a similar pattern. Historically, price spikes do not last and are sold off pretty hard in the weeks that follow.

Outlook: Bearish

Figure: 3 Silver 50/200 DMA

Comex Open Interest


This is where things get interesting. Only the first leg of the up-move was driven by an increase in open interest. The second leg up was actually happening as open interest was falling. This means that futures traders had already given up on the rally in mid-March before prices really took off. These traders have already taken profits which means their selling is most likely exhausted. Furthermore, there is now cash on the sideline that can fuel the next rally.

Outlook: Bullish

Figure: 4 Gold Price vs Open Interest


Silver is different than gold here because open interest and price action were much more correlated during the price spike. Open interest remains high relative to recent history which means that more sellers could come in quickly if prices do not hold here.

Outlook: Neutral to bearish

Figure: 5 Silver Price vs Open Interest

Margin Rates and Open Interest

The CME uses margin requirements to pull momentum out of the futures market. This is usually done to halt explosive up moves and contain them, but can be used in quick bear markets as both shorts and long are subject to margin requirements. Margin increases force traders to put up more capital or sell off contracts to meet requirements. Managed Money (see CoTs report) are more sensitive to margin increases as they tend to be more leveraged and capital constrained, so margin increases typically force them to liquidate positions (if they are long prices go down as they sell, and if short prices go up). More often, traders are long, and higher margins cause forced selling.


Margin rates have been pushed to their highest level since April 2021. Margin rates probably won’t go too much higher. They have already had the impact of containing open interest. As shown above, the price continued higher despite a decrease in open interest and an increase in margin! This means that futures traders were not responsible for the latest upmove in gold. Thus, an increase in margin could do little to keep prices down if another upmove were to commence. Because margin rates are already elevated the CME’s ability to contain the next big run-up will be limited.

Outlook: Very Bullish

Figure: 6 Gold Margin Dollar Rate


Once again, the situation in silver is not similar to gold. This market looks more like historical instances. This means that any upmove in silver is likely to be met with a higher margin putting a cap on prices.

Outlook: Neutral to bearish

Figure: 7 Silver Margin Dollar Rate

Gold Miners

The gold miners have been consistently leading the price of gold in both directions for years. That said, the miners did not fully participate in the last move up in gold which further suggests that traders are not in control of this market right now. This is likely not a reliable indicator at the moment.

Outlook: Neutral

Figure: 8 Arca Gold Miners to Gold Current Trend

The chart below shows the longer-term historical relationship. The miners have been absolutely punished over the last decade as stock traders have never bought into the current move in gold. That leaves these stocks deeply undervalued and set up for an explosive move when the gold price takes off.

Figure: 9 Arca Gold Miners to Gold Historical Trend

Trade Volume

The final indicator is trade volume on the CME. This is related to but not exactly tied to open interest. Higher trade volume with flat open interest can mean churn. Higher trade volume can also be met with increases or decreases in open interest if buyers or sellers are in control.

In gold, there is once again evidence that futures traders were not driving the price spike. Trade volume was only slightly above average but nowhere near on par with previous price increases. This is clear when looking at 2020 when gold last spiked higher along with trade volume. Once again, it is clear that traders did not drive the latest price gains in gold.

Outlook: Very Bullish

Figure: 10 Gold Volume and Open Interest

Once again, silver is diverging from gold. It is clear that trade volume in the futures market was driving prices higher. This means that silver is more susceptible if traders decide to exit or even short the market.

Outlook: Neutral to Bearish

Figure: 11 Silver Volume and Open Interest


On the surface, the recent price spikes in gold and silver look a lot like history where big price spikes run out of steam and are then sold off over the coming weeks and months. The rest of the data easily aligns with this narrative in silver, but not in gold. It is very clear that something else is going on in gold. The second price spike in gold did not originate on the CME.

It looks like gold got triggered somewhere outside the CME and then silver traders were forced to play catch-up. These same traders were all too ready to sell at the first sign of trouble as they always do. What they are missing is that the floor on gold should be much higher because you don’t have gold traders itching to sell. The gold traders who sold were the ones who jumped onto the first price spike (Mar 1- Mar 14). This likely means their selling is close to exhausted.

Gold may not immediately rebound and jump higher (though it may), but it is much less likely that another major down leg is seen in the near term. The upside in gold is much bigger than the downside, and silver tends to follow gold.

Data Source: and for DXY index data

Data Updated: Nightly around 11PM Eastern

Last Updated: Apr 30, 2024

Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard:

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