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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.

Gold weekly showing 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.

Gold daily showing seven-week bull flag formation

Silver has a less impressive bull trend as you can see in the weekly chart below.

Silver weekly showing bull trend

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.

Jason Sen

Technical Analyst & Trader

For more information and trading education visit Intertrader

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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