This week’s outlook for gold and silver
Spot gold has staged a strong recovery over the past five months, to levels last seen in May 2018. We are hovering just above the longer term 61.8% Fibonacci support as you can see in the weekly chart below.
The daily chart below shows that gold has broken above the trendline joining the August and October peaks. This trendline is working nicely as support now. As is usual in a bull trend, when markets become overbought, prices are consolidating in a sideways pattern to allow the overbought conditions to ease. Looking at the slow stochastic at the bottom of the daily chart, this seems to be working! A healthy development for bulls.
Note how the purple 55-day and blue 100-day moving averages have turned higher to confirm the trend. The purple 55-day is about to cross above the red 200-day for a golden cross buy signal. The price is even holding well above the green 500-day moving average at $1267 for further bullish confirmation. This level should act as strong support on any short-term profit-taking.
The four-hour chart below more clearly shows that consolidation wedge forming over the past two weeks. I think this is a bull flag. Bullish flag formations are found regularly in strong uptrends. They are called bull flags because the pattern resembles a flag on a pole. The pole is the result of a vertical rise in prices and the flag results from a period of consolidation.
In the short term we have been holding minor support at $1285/86 but a move below here targets $1279/78, perhaps as far as strong support at $1275/74. Long positions need stops below $1271. Look for a buying opportunity then at $1267/66, with stops below $1262.
Holding above $1285/86 targets $1288 and $1292/93, perhaps as far as $1298/99. Above $1300 we then look for $1303/04 and $1308/09.
The same for silver?
So the outlook for gold appears to be bullish. It makes sense to see if the technical analysis lines up the same way for silver.
The daily chart below for spot silver is similar to the gold chart with a potential bull flag. Prices are holding above the red 200-day moving average at $15.34/30.
But here’s where it gets a little confusing, if we closely examine the monthly chart for spot silver below.
I have zoomed in to focus on the 10-year trendline dating back to late 2018. As you can see, prices topped exactly here last week. Silver will need a clear and sustained break above $16.00 for the next buy signal, targeting the 200-month moving average at $16.38.
The weekly chart shows further resistance at $16.29/34, just below the level seen on the monthly chart. Just above here we meet the 21-month trendline resistance at $16.65/70.
A break above $16.70 would be a very strong longer-term buy signal. In the short term, silver trades sideways to ease overbought conditions with first support at $15.55/53 still holding perfectly, but a move below here targets support at $15.35/32. Try long positions with stops below $15.27.
For short trades, look for an entry level at $15.86/89 with stops above $16.00. A break higher would be a buy signal, in which case hold long positions again.
Technical Analyst & Trader
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.