Gold/Silver Weekly Update 220826

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 Gold: Forecast vs Actual


Gold: The week ahead


Silver: Forecast vs Actual


Silver: The week ahead


Executive Summary

The outlook for Gold and Silver remains bullish. In the q50 (median) quantile, Gold outperformed the weekly forecast by 3.8% while Silver outperformed by 3.97%. The steep run-up was partly due to Scott Bessent's (US Treasury) intervention to reverse the rise in 30-year Treasuries which hit aan unprecendented  high of 5.34% As with his Japanese Yen intervention, this did not work as yields fell for a day before before retracing back to 5.28% 

On a relative basis, and compared with historical Gold/Silver behaviour, Gold far outperformed Silver. Historically, Silver has a Beta of at least  2. That is, Silver moves up (as well as down) twice as much as Gold.

 After such a breathless run-up, it is not surprising that the momentum will decelerate for the week ahead. Silver will underperfrom Gold, as it is not a 1st tier central bank reserve asset like gold, and 50% of demand for Silver is industrial. 

 However whether our outlook for the week ahead holds depends on macro factors like the economic impact of Trump's proposed sanctions on Iran (and any country trying to do business with Iran) which will be announced on Monday 24 August. It also depends on (1) whether the USD as proxied by the DXY Index continues to fall, as well as (2) real yield  of nominal interest rate minus inflation expectations as proxied by TIPS (Treasury Inflation Protected Security) continues to fall. (1) and (2) are bullish for Gold and Silver. My two separate stand-alone models on DXY and TIPS currently show that USD will contine to fall, and real yields are beginning to fall. 



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