Executive Summary

Precious metals markets opened the final week of October with gold hovering near all-time highs and silver at 12-year peaks, as traders position ahead of critical economic data and next Tuesday's US presidential election. Gold opened Monday at $2,736.10 per troy ounce, slightly below Friday's close of $2,740.90, while maintaining remarkable year-to-date gains of approximately 27%. The yellow metal's resilience in the face of a strong dollar and elevated real interest rates underscores the depth of safe-haven demand driven by escalating Middle East tensions and election uncertainty.

This week brings an unprecedented confluence of market-moving events: Wednesday's FOMC decision, Thursday's Core PCE inflation data, Friday's employment report, and Tuesday's election outcome. With managed money positions near record extremes and technical indicators flashing caution signals, the stage is set for potentially explosive price action in either direction. Silver's outperformance continues with year-to-date gains exceeding 30%, though extreme oversold conditions suggest a near-term bounce may be imminent.

Current Market Position

Prices as of Monday, October 28, 2024 at 9:00 AM ET

Technical Analysis

Gold: Testing Critical Resistance at Record Levels

Gold's failure to sustain above the $2,747 resistance level signals near-term exhaustion after the remarkable rally from $2,600 support. The metal now consolidates between $2,722 first support and the psychological $2,750 resistance. RSI readings near 70 indicate overbought conditions, while the break below ascending channel support last week warns of potential corrective pressure. A decisive break below $2,700 would target the 50-day moving average near $2,650, potentially offering better entry points for bulls.

Silver: Extreme Oversold Conditions Create Opportunity

Silver's technical setup appears more constructive despite recent weakness. RSI plunged to 25, marking the most oversold reading since March, while price holds above critical support at $33.00. The white metal's consolidation near 12-year highs suggests accumulation rather than distribution. Initial resistance stands at $33.70, with a break above $34.50 needed to resume the uptrend toward the psychological $35.00 target. The gold-silver ratio near 83 indicates relative undervaluation by historical standards.

Week Ahead Calendar

Trading Scenarios

Key Themes for the Week

Election Uncertainty at Maximum

With just eight days until the election, polls show all seven swing states within the margin of error. Pennsylvania, Michigan, and Wisconsin remain toss-ups, while Trump holds slight leads in Arizona, Georgia, and North Carolina that fall within polling error. Markets are pricing maximum uncertainty with implied volatility elevated across asset classes. A contested outcome or delayed results could spark immediate safe-haven flows into precious metals.

Fed's Delicate Balancing Act

The Federal Reserve faces a challenging decision just days before the election. While markets price near-certainty of a hold, Powell's forward guidance will be crucial. Any hint of a November cut could be seen as politically motivated. More likely, the Fed maintains its data-dependent stance while acknowledging progress on inflation. Current market pricing shows 66% probability of a 25-basis-point cut at the November 7 meeting.

Geopolitical Risk Premium Persists

Weekend escalation in the Middle East adds fundamental support for precious metals. Israel's retaliatory strikes on Iran on October 26 and Iran's vow to respond have ratcheted up regional tensions. The conflict's expansion beyond Gaza creates persistent safe-haven demand, with central banks and investors seeking portfolio insurance through gold allocation.

Extreme Positioning Creates Two-Way Risk

CFTC data reveals managed money gold positions near 771 tonnes, approaching the psychologically important 1,000-tonne level that has marked historical turning points. This extreme bullish positioning creates vulnerability to sharp reversals on any disappointment. Silver shows similar but less extreme positioning, offering relatively better risk-reward for new longs.

Week Ahead Outlook

This week presents one of the most significant event risk clusters of 2024. The combination of Fed policy, employment data, and election uncertainty creates potential for explosive moves in either direction. Traders should prepare for elevated volatility and potential gap moves, particularly around Wednesday's Fed decision and Friday's jobs report.

Despite near-term technical caution signals, the fundamental backdrop remains constructive for precious metals. Central bank demand continues at robust pace, with year-to-date purchases well above historical averages. China's pause in official gold buying may reflect price sensitivity, but private demand remains strong as evidenced by elevated Shanghai premiums.

The smart money appears to be rotating from gold to silver given relative valuations and technical setups. Silver's extreme oversold condition near critical support offers superior risk-reward for tactical longs. However, given event risk, wider stops and reduced position sizes are prudent. Any dips toward $2,650-$2,700 in gold or $32.00-$32.50 in silver should attract strong physical buying interest heading into year-end seasonality.