Cut exposure in Silver amid short-squeeze-driven volatility: Bhavik Patel

 CME has raised margin for silver to push back any more speculative moves

Currently, gold prices are under pressure as the metal is trading below 50 and 200 EMA. However, we are still bullish in the long-term as price risk remains upwards. The macro-environment remains supportive of higher prices in light of the weaker US dollar projections, negative real yields and more US stimulus. There are also higher chances of inflation coming this year which will be beneficial for gold prices. Moreover, retail demand has picked up and India has cut custom duty so there are chances of physical gold demand going up this year. Physical demand fell to a 11-year low in 2020. Central banks are expected to remain net buyers in 2021 despite official reserve demand tumbling to a 10-year low in 2020. Going forward, gold will continue to take price direction from the US dollar and real yields as the Federal Reserve remains dovish.

Silver has been choppy, swinging between $27to $29.70 in the last 4 trading session. Last time when we recommended to go long above $26 for target of $30, it almost got achieved. Now, volatility has increased and so we would recommend lowering any exposure in silver till sanity returns in the market. CME has raised margin for silver to push back any more speculative moves.

Oil price has rallied and is comfortably above $54 as US lawmakers moved closer to approving President Joe Biden's $1.9 trillion Covid-19 aid bill without Republican support. The market was buoyed by the latest assessment by the OPEC+ that oil stock piles will decline to below a five-year average by June. This was their target as OPEC+ wanted to drive all the surplus oil by the end of 2021. OPEC is also compiling with a production cut which is supporting prices despite weak demand. OPEC crude production increased for a seventh month in January after the group and its allies agreed to ease supply curbs further, but the growth was smaller than expected. We don't see any reversal in crude oil until 3,800 is breached on the downside. So keep holding a long position and buy on declines with stoploss of 3,800 closing bases.