Gold prices retreat after hitting 6-year high while silver stays strong

gold prices

Gold prices have hit new highs on Friday, breaking a six-year high in overnight trading before tumbling back down on Friday morning.

Global economic worries have come and gone over the past couple of weeks, as tensions in the Strait of Hormuz grew and other international issues were affecting the world.

However, the announcement of the resumption of U.S.-China trade talks following the G7 meeting alongside a possible negotiation between Iran and China according to statements made by the country’s foreign minister have all helped eased global worries.

As such, it’s not surprising to see gold make a mild retreat as the week came to an end as investors in the precious metal chose to capture some of their profits.

Gold futures contracts for August delivery touched a six-year high at $1,454.45 per ounce but ended up giving back all of their after-hours gains by mid-day Friday, falling down to $1,427.40 per ounce. In contrast, silver ended up reaching a 13-month high on Friday after touching $16.625 per ounce, ending the week up 7 percent overall.

“Gold did the heavy lifting by breaching the 6-year resistance at $1,360, but it was silver’s intransigence that worried. Rather like the vapours emanating from the Temple of Apollo at the oracle in ancient Delphi, silver’s price action now portends well for gold,” said Ross Norman from London’s largest bullion broker Sharps Pixley. “The gold/silver ratio has fallen from 95 to 87 and if you like gold you should positively love silver as there is scope for a further correction.”

At the same time, the markets on Friday were buzzing in response to the remarks made by New York Federal Reverse President John Williams on Thursday, where he suggested the Fed should do more to prevent a slowdown in the U.S. economy.

Many speculators now think that the Fed could possibly do a 0.5 percent rate cut in it’s late July meeting, although this still remains rather unlikely. Instead, the St. Louis Fed President James Bullard said on Friday that a 0.25 percent rate cut might be more appropriate.

While some hedge funds and institutional investors have increased their exposure to gold in the recent weeks, the aggregate long position of gold futures in comparison to the total interest is currently at 36 percent, well below the degree of bullishness seen when gold hit a peak in 2011.

This suggests that there’s still plenty of room for gold to shoot up in the future. Billionaire and legendary hedge fund manager of Bridgewater Associates, Ray Dalio, has suggested before that the current market could just be the prelude for a long and healthy bull run for gold.

Nor is this opinion shared only by Dalio. A recent survey put forward to both Wall Street professionals as well as Main Street investors saw that the vast majority of both groups were bullish on gold’s future.

The Wall Street group were 67 percent bullish, while 25 percent and 11 percent were bearish and neutral respectively. The non-Wall Street group was even more bullish, at 74 percent while only 15 percent of respondents were bearish on the precious metals future.