A Golden Opportunity to Take Profits in Precious Metals: BTIG

Investors are being advised to consider taking profits in precious metals, particularly gold and silver, following strong gains year-to-date. In a recent note, analysts from BTIG indicated that while they maintain a positive outlook on these assets over the next 6 to 12 months, the current market conditions present a strategic opportunity to sell and potentially reinvest during a market pullback.

Gold has experienced a notable rise of approximately 29% this year, while silver has increased by 34%. BTIG believes this is an opportune moment for investors to secure profits. The analysts pointed out that technical indicators suggest the market may be reaching a turning point despite the ongoing bullish momentum.

Daily charts reveal signs of “upside exhaustion,” and the weekly chart indicates a “negative momentum divergence in overbought territory.” Historically, October tends to be a weak month for gold, with an average decline of 0.32% over the last 25 years.

Additionally, BTIG observed that gold prices have been closely correlated with real interest rates in recent months. Since the last Federal Open Market Committee (FOMC) meeting, the real yield on the 10-year Treasury has increased from 1.55% to 1.60%, even as gold rose by around $100. This divergence further supports BTIG’s recommendation to take profits at this time.

The analysts propose that if gold prices do experience a pullback, it could provide a more favorable re-entry point. Specifically, they suggest looking for opportunities if the SPDR Gold Shares ETF falls into the 225-234 range, which would represent a decline of 5-8%.

Regarding silver, BTIG noted that it has not yet surpassed its highs from May and expects a dip in October. Following this expected pullback, they believe it may be a good time for investors to consider increasing their positions ahead of a potential significant breakout.