Since the beginning of May, demand for gold and silver has been rebounding, with buyers increasing their purchasing power in the past few days, pushing gold prices back above $2370 and silver above $28.5.
After several days of consolidation, silver prices have fallen back to the $28.0-$28.8 range from April. This week's uptrend reminds people that the decline in the second half of April was a corrective pullback. The local lows at the beginning of May roughly coincide with a 61.8% retracement of the uptrendfrom late February to the upper limit of the consolidation area we discussed above.
FxPro senior analyst Alex Kuptsikevich notes: If prices consolidate above $28.8, this bullish scenario will be confirmed, paving the way to a potential first step towards the $33 area. However, it's important to remember that silver has not achieved this in the past 11 years, with three significant events occurring before the April test in 2020 and 2021.
In terms of relative recovery momentum, gold and silver's gap is about half of the former's and has yet to recover all the losses since April 22. Nevertheless, it is worth considering that since February, gold quotes have been periodically refreshing historical highs.
Regarding gold, the April decline can also be seen as a correction to a 76.4% rise from February's lowest closing price to April's highest closing price. In this case, the upward target becomes the $2640 area (161.8% of the initial rebound).
Meanwhile, the high yields on bonds in developed countries, massive budget deficits in many countries, and the need to support the economy suggest that the upward potential is limited. Before gold and silver reach new levels, we question the success of new highs and see the possibility of another decline.
