Gold and Silver Divergence Amidst Upward Momentum

The precious metals complex closed the week in historic fashion, with gold and silver both registering record weekly closes while palladium surged to levels not witnessed since 2011. Silver futures settled at $62.13, representing a weekly gain of $3.34 or 5.68%, while gold futures advanced $103.50 or 2.45% to trade around $4,332 at the time of writing. The week's standout performer in percentage terms, however, was palladium, which climbed $110.60 or 6.68% to $1,765, reaching an intraday high of $1,804.30. This marked the first time the industrial precious metal has traded above $1,800 since 2011, underscoring the broad-based strength permeating the entire precious metals sector.

Silver's performance over the past three weeks has been nothing short of remarkable, establishing the white metal as the undisputed star of the precious metals complex. Despite Friday's decline of $1.87 or 2.92%, silver futures have accumulated gains of $12.28 over three consecutive winning weeks, an astonishing advance of 24.64% in less than a month. For the year, spot silver has posted gains of approximately 114%, substantially outpacing the roughly 64% advance recorded in spot gold over the same period. The white metal achieved four consecutive record highs this week before succumbing to profit-taking on Friday, a natural and healthy response following such extraordinary performance. Given the magnitude of the weekly gains, some degree of consolidation or retracement should come as no surprise to market participants. Trading activity in the opening sessions of next week will prove critical in determining whether silver enters a more meaningful corrective phase or extends its remarkable rally to even loftier heights.

Traders should exercise caution if silver continues to forge new record highs in the coming sessions, as the metal has already exceeded our year-end target of $60. While additional upside certainly remains possible given the prevailing momentum, we believe gains would likely be capped near the $70 level in the near term. Nevertheless, several technical indicators suggest the rally may have further room to run. Open interest and trading volume in silver futures have expanded rather than contracted, a particularly significant development given the typically subdued holiday trading season when participation across all markets tends to diminish as traders step away until after the New Year. Volume in silver futures reached 180,000 contracts on Friday, the highest level of the year with the exception of October 9th. This robust participation during a period that historically witnesses reduced activity suggests that underlying momentum remains firmly intact and higher prices may yet materialize before year-end.

Gold futures have similarly defied seasonal patterns, maintaining steady volume when diminishing participation is the norm for this time of year. Friday's open interest exceeded 280,000 contracts, representing the highest daily volume since October for the precious yellow metal. This surge in participation coincided with a $20 gain that lifted gold to its third-highest close on record, a fitting development given the elevated interest from market participants. The intraday high of $4,387.80 fell just $10.20 short of the all-time high of $4,398 established on October 20th, placing the metal within striking distance of uncharted territory.

From a technical perspective, gold's price action this week has been constructive. Four consecutive daily gains accompanied by rising volume indicate renewed investor interest in the precious yellow metal heading into year-end. However, Friday's candlestick formation warrants attention from technically inclined traders. The long upper wick, or shadow, visible on the daily chart reveals formidable resistance at the all-time high level. This price action suggests that sellers remain active near record territory, and a decisive breach of the $4,398 threshold may require additional catalysts or continued accumulation before gold can sustainably trade at new all-time highs.

As the year draws to a close, both metals find themselves in enviable technical positions, supported by robust volume and persistent investor demand despite the seasonal headwinds that typically characterize holiday trading. The divergence in year-to-date performance between gold and silver, with the white metal posting nearly double the gains of its yellow counterpart, speaks to the unique dynamics driving each market. Whether this outperformance continues into the new year or mean reversion reasserts itself remains to be seen, but the strength exhibited by both metals this week suggests the broader precious metals bull market remains firmly intact.

Wishing you as always good trading,