Investing.com – BTIG analysts said in a note Thursday that investors should consider taking profits in precious metals, especially gold and silver, after strong gains this year.
While remaining constructive on precious metals over the next six to 12 months, BTIG notes that current market conditions present a tactical opportunity to sell and potentially buy back these assets during a downturn.
Gold is up about 29% this year, while silver is up 34%, making this an ideal time to lock in gains, according to BTIG.
“We believe we are at one of these inflection points, despite their constructive momentum and trends,” BTIG said in their note.
They added that the daily charts show signs of “upside exhaustion,” and the weekly chart points to “negative momentum divergence in the overbought area.”
Historically, October has been a weak month for gold, with an average decline of 0.32% over the past 25 years.
BTIG also noted that gold and real rates (inversely) have traded closely in recent months.
However, they acknowledge that since the last FOMC meeting, the real yield on the 10-year Treasury note has risen from 1.55% to 1.60%, even as gold rose about $100. This difference is another factor that leads BTIG to take profits.
BTIG suggests that a decline in gold prices could be a more attractive re-entry point, especially if the SPDR Gold Shares ETF (NYSE:) falls into the 225-234 range, which represents a 5-8% decline.
For silver, BTIG noted that it has yet to break above its May high, and they expect a dip in October, after which investors could consider adding to their positions in anticipation of a larger breakout.
