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Outlook for 2018: gold and silver

Jason Sen
Despite almost 10 years of a very strong bull market for US stocks there is no sign of this run ending. Much as I believe the market is overvalued I would never dream of betting against the trend. I will only watch for patterns through 2018 that could signal the end of the bull run before I will even think about shorting.
My best suggestion for 2018 is taking long positions in gold and silver. This is not only because they are good hedges against a sharp correction in stock markets.
In the gold weekly chart below you can see the price has traded mostly sideways over the past two years, once we made a low for the correction at 1045 in late-2015. This year we have been unable to beat the recovery high set 18 months ago in mid-2016 at 1375.
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The weekly moving averages confirm the sideways trend. I am encouraged, however, that the price is holding above the 200-week (red) and 100-week (blue) moving averages as we near the end of the year. More importantly, we are holding above the five-year downward-sloping trendline. At this stage this is at 1215, just below the 200-day moving average at 1232.
Bulls need to see the price close the year above 1270 to start 2018 on a more positive tone. A move back above 1280/85 in January would be a good start to the year. If we can then beat the October/November highs of 1297/1306 we should be on the way to the 2017 high at 1357.
We then meet the most important resistance of the year at 1374/79. This is the 2016 high, which was held by the longer-term 38.2% Fibonacci resistance. A break above the 2014 high at 1387/88 should be seen as a strong longer-term buy signal.
The silver monthly chart below shows the price stabilising over the past two years. We have hovered above the red 200-month moving average support around the $16 area.
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You can also see the important 13-year trendline dating back to early 2004. This held perfectly when tested more recently at the end of 2015 and in mid-2017. I believe we are building a base and will eventually climb back towards the 2017 high at 20.64, then the 2016 high at 21.10.
Note how the blue 100-month moving average worked perfectly as resistance when tested in 2016. Obviously a break above this average in 2018 would be an additional buy signal. This would nicely clear the 500-week moving average (now around $21) to encourage bulls.
The silver weekly chart below gives further cause for optimism as long as we continue to hold the five-year downward-sloping trendline support, as we have done in recent weeks. A push higher through the October/November high at 17.37/17.46 in 2018 will also clear the 100 and 200-week moving averages for further bullish confirmation.
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Jason Sen

Technical Analyst & Trader
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The content of this article is the personal opinion of the author and not Intertrader. You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.

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