Precious Metals – Weekly Technical Analysis, 12/08

Aug 12, 4:54 am
Gold & Silver

Gold futures are showing signs of a recovery after the precious metal tested the lows of 1081.13 last week. The recovery comes as we pointed out last week on the bullish RSI divergence which could see Gold futures post a correction to the decline with the likelihood of a possible retest to 1150 through 1200 region. For the week, Gold futures are up 1.49% at the time of writing.

On the daily charts for Gold, we see that price formed a base near the 1079 – 1080 level of support and is currently struggling to break higher. Short term support comes in at the 1098 or 1100 handle which, if holds prices could see a straight rally to the next resistance at 1150 through 1140. To the upside, a continuation will see prices attempt to test or break the next resistance at 1180 – 1175 and eventually to the 1217 – 1213 level of resistance.

Gold – Daily Chart, 12/08
Gold – Daily Chart, 12/08

On the 4-hour chart, the price action in Gold is more evident as prices kept bouncing off the lows near 1080 before gradually pushing higher to clear the resistance at 1100 – 1103. We could anticipate a possible test back to this level to establish support ahead of an impending rally that could see Gold test back the previous highs near the resistance level of 1180.

Gold – H4 Chart, Potential Reversal on break of trend line
Gold – H4 Chart, Potential Reversal on break of trend line

On the above H4 chart we also notice the medium term trend line being broken currently and price is therefore consolidating near this level which see’s a confluence of the trend line acting as a dynamic resistance as well as the horizontal resistance level that was recently breached. A successful close above the trend with a retest to 1100 region will clear the way for the potential correction to the upside.

Silver prices have been a bit more bullish that Gold, with Silver gaining close to 2.7% for the week at the time of writing. The price action in silver is following the similar path of Gold which is seeing a correction that was mentioned in the previous week’s analysis. Silver prices saw a reversal off the lows near 14.5 and have continued to post gains. Prices are a few points off the main broken support at 15.5 which could be tested for resistance. The daily chart for Silver below shows the head and shoulders pattern staying intact and the current rally back to 15.5 could see a retest of the broken trend line.

Silver, Daily chart – Potential retest to neckline
Silver, Daily chart – Potential retest to neckline

Switching to the H4 charts for Silver, we notice that after price broke out from the falling price channel, there was a brief retest back to the lows near 14.52 before reversing off these lows. Silver prices cleared the short term resistance at 14.95 through 14.80 on a rather bullish noted. However, we expect a retest back to 14.95 through 14.8 region ahead of the test to 15.5 – 15.7 level of support which could now be tested for resistance.

Silver H4 Chart – Potential correction underway
Silver H4 Chart – Potential correction underway

A close above the 15.7 zone could potentially put to risk the head and shoulders pattern formed on the daily chart and could in fact point to further correction to the upside, which is something traders need to bear in mind.

As for now, a test of resistance to 15.5 – 15.7 will likely confirm the head and shoulders pattern and we can expect Silver to resume its downtrend in the near to medium term.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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