Silver and gold test important support levels
Silver is yet to establish a bull trend, but this is my big tip for the rest of the year.
As you can see in the daily chart below, we have been in much of a sideways trend since November last year. A burst through the 100, 200 and 500-day moving averages at the end of August was promising for bulls. However, as we became overbought at the beginning of September profit-taking was triggered.
We have now fallen back to test the blue and green 100 and 500-day moving averages. These coincide with important 38.2% Fibonacci support at $16.80. In fact we saw a bounce from exactly that point yesterday, just as we become oversold on the daily chart.
More importantly, we have dipped back to test the 100-week moving average and five-year trendline at around the same $16.80/$16.70 area.
Therefore this support could not be more important. I think this is a golden opportunity for investors and it’s possible we may never see this price again. If this proves to be the best buying opportunity of the last seven years, as I believe it is, silver will rocket now from the support back up through the 200-week moving average at $17.30.
This will initially target the high for this month that $18.20 before the high so far this year at $18.64. But this should be just the start of the longer-term bull trend. A break above $19 would be another important buy signal as we break through the longer-term 23.6% Fibonacci resistance at $18.75.
Gold managed a good recovery this year, but could not quite test last year’s high of $1374, as we topped at $1357 this month. In fact it was the three-and-a-half-year trendline, at $1366 in the weekly chart below, that was the likely reason for profit-taking.
There was good support at around $1300. But we will need to hold above the previous April/June high at $1295 if bulls are to remain in control of this nine-month trend. Although we dipped to almost $1287 yesterday, a weekly close tonight above $1300 would be encouraging.
The weekly moving averages offer some encouragement. There’s a bullish 100-week moving average crossover of the 200-week moving average. We are also holding above the green 500-week moving average support.
Having expected gold to hold above $1300, the dip below $1295 is of concern. But we are seeing something of a recovery this morning. Bulls must force a weekly close above the important $1300/$1305 area to feel confident for next week.
I would take a break above $1305 as a buy signal today targeting $1315 and then $1321/1322. These are only minor short-term obstacles and, once through here, the path is a lot clearer to $1330, $1342 and then a re-test of this year’s high at $1357.
Technical Analyst & Trader
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