Gold and silver trading in a gently downward-sloping trend
In the short term, over the past seven weeks, gold has been trading in a sideways trend but with lower peaks. This appears to be a bullish flag pattern. This is a consolidation pattern, which is likely to see prices breakout above the upper trendline eventually for a buy signal.
Gold has resistance at $1497/$1499 in the very short term but more important upper flag trendline resistance at $1506/08. A break above here (and especially a weekly close above here tonight) would be a buy signal targeting $1518/19, $1523/24, $1528/29 and $1535. Once through this minor resistance area, gold can push higher for a re-test of the 2019 high at $1557. Obviously a break above here will act as the next important buy signal in the 14-month bull trend.
The downside is likely to be limited in this consolidation phase with minor support at $1488/85, but a move below $1485 targets $1482/81 and $1477 before weak support at $1473/71. A break lower targets $1468 and strong support at $1464/62. If we continue lower look for $1458/55, then strong support at the lower trendline of the pattern at $1449/46.
Silver has a less impressive bull trend as you can see in the weekly chart below.
Silver has also had a much more aggressive correction over the past seven weeks, although through October so far we have seen a more stable trading pattern as we hold trendline resistance, now at $17.50/60. A sustained break above this quite steep downward-sloping trend line acts as a buy signal. Note that the trend line is declining by about five ticks a day so it will not take a huge effort to break and hold above the line next week. If we continue to trade sideways, as we have this week, we will break the trendline for a buy signal, without needing to see higher prices.
Silver has key resistance at $17.50/60 today of course. Short positions need stops above $17.70. A break higher is a buy signal targeting $1790, $1800, perhaps as far as $1830/32 and $1855/60 into next week. Once through $18.70 we have another buy signal taking us towards the 2019 high at $19.55/64.
Failure to beat important resistance at $17.50/60 in the very short term targets minor support at $17.34/30 and $17.10/00. A break below $16.95 targets $16.85 and $16.80/78. Below $16.75 look for $16.57/55 and perhaps as far as support at $16.34/30.
Technical Analyst & Trader
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