Gold Tops $1,300 with Miners Cutting Costs; Silver Outlook

by on February 13, 2014 7:42 pm BST

Gold hit $1,303.4 per ounce before slightly pulling back, signaling the longest rally since 2011. As risk assets trade on the hopium of a paused quantitative easing taper from the Fed, gold has led the way on the back of stronger physical demand and weaker economic demand. In 2014, so far, gold has gained 7.9 percent. Silver, nearing $20.50 per ounce, has rallied alongside gold as sentiment towards the the US dollar changed.

“People are realizing that the economy still needs stimulus to grow, and that is keeping gold supported. Yellen sounded dovish. Today’s key economic numbers makes it clear that all is not well,” said Jeff Sica, president of Sica Wealth Management. However, Goldman Sachs still remains bearish, “the path will be more of a slow grind lower over the course of the year, unlike last year, as markets will wait for strong economic data to confirm that U.S. economic growth is accelerating”, said head of commodity research Jeff Currie.

Barrick Gold Corp. and GoldCorp Inc. have been able to reduce fourth-quarter operating costs as they begin to shift for lower priced gold. The cost-reducing efforts will prove beneficial if gold can remain in rally mode. Barrick has seen a reduction of operating costs by 14 percent to $899 an ounce. GoldCorp’s costs dropped 11 percent to $810 per ounce.

Silver has seen a major boost as sentiment for the US dollar changed quickly this week. Previously, the strength of the silver/dollar pair trade has the makings of silver making new lows, but the dollar has been fickle. Price action is now testing resistance on the daily chart within a consolidation channel. If silver can push through $20.50 per ounce, there is potential for silver to reach $21.28 per ounce. Support lies near $19.95 to $20 per ounce. There could be a 20/50 EMA bullish crossover that should give a little added momentum to the move. However, expect a short pullback given that silver is up nine of the last 10 sessions.

1D Chart of SI

1D Chart of SI