By Kathryn James
Both gold and silver have been falling away from the highs made in October 2012, lured by the pulling forces of the 200-day moving average. While fear of deflation and imminent market collapse continues to drives economic policy and supports the markets to a large degree, precious metal prices should increasingly feel this pressure as funds are allocated further into riskier assets. Despite this lack of support from economic policy, even if the tide were to turn a stable dollar, deflation and a weaker stock market could also lead to more selling pressure in commodities and subsequent lower prices in gold and silver. So the outlook doesn’t look too hot for gold or silver either way and a sell signal trigger could provide a good trading opportunity in either of the precious metals. The following is a technical summary of where gold and silver sit today.
Gold topped on 5th October at 1797 and has since declined by nearly 10% to the recent low of 1625 on 4th January. The lower high and lower low indicates that the downtrend is becoming established. The key technical 200-dma has provided support around 1660 which has fuelled a bounce back to today’s price of 1680 but the price would need to rally above the lower high marked back in November of 1754 to trigger a buy signal. A break above 1800 being super bullish on the longer term chart.
I’m watching the current trading channel for a break in either direction but I’m favouring gold as a sell and a rise to the upper boundary of the channel would offer a decent entry level to trade. A further test of the 200-dma is worth watching also, if it fails to hold second time round then trouble could be looming for gold.
Silver shows a similar technical picture and has fallen by over 10% since it peaked in September. I’m equally as bearish on this chartbut as with gold would favour some strength to sell into. It barely sits just above its 200-dma. 30.00 support and the uptrend line from the June lows are too close to offer any comfort to the bulls and a fall back to support at 27.50 looks plausible. Upside resistance lies at 32.50 and a break from the current trading flag may take it there. However there is a strong technical indication that silver could peak fairly soon as it sits at the top of a small daily flag pattern (see chart below), but I’m waiting for further indications to confirm a trade.
Please note: Both Silver and Gold charts shown are the continuous CFD market. Silver CFD prices are shown in thousands i.e. 3000 whereas the cash market trades in tens i.e. 30.00.