Gold Price Remains Restrained Despite Massive Rally in Silver

Gold (XAU/USD) traded on a bullish sentiment through the mid-European session on Monday, as investors rode on the massive gains in the silver (XAG/USD) market. However, gold remained confined within last week’s highs amid a goodish bounce in the US dollar, which tends to undermine demand for the dollar-denominated commodity.

Gold remained range-bound for the seventh consecutive session as investors anticipate new developments around a US stimulus package.

Futures contracts for silver saw a spike in the early trading hours on Monday as Reddit retail investors appear to have shifted their focus to the metal markets. The short squeeze saw spot silver rise by about 11% to a new 8-year high of $30.18/ounce earlier today.

If this rally holds, it would be the largest one-day spike in the commodity since a 13% spike in March 2009. Silver briefly claimed the $30.18 high on OANDA to record its highest ever point since February 2013 (exactly eight years ago) before reeling to the mid-$29 level. Meanwhile, the boom got reflected in silver-related equities late last week.

That said, gold’s relatively subdued standing amid the 11% spike in silver alludes that the rally may not be sustainable. At the moment, an ounce of gold can buy 63.5 ounces of silver, compared to 73.3 ounces in January.

Soni Kumari, a commodity strategist at ANZ, noted that “given the gold-silver ratio is at a multi-year low, we see limited room for further outperformance of silver.”

Gold (XAU) Value Forecast — February 1

XAU/USD Major Bias: Bullish

Supply Levels: $1875, $1890, and $1900

Demand Levels: $1860, $1850, and $1838

Although gold began this week on a goodish bounce, it is yet to confirm a bullish momentum for traders. A sustained break above the $1875 resistance should open the door for buying for the yellow metal, which could send it to the $1900 psychological resistance in the coming days.

Failure to clear this resistance level could reinstate gold’s previous bearish sentiment and send it to the $1830 area once again.

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