Precious Metals – Weekly Technical Analysis, 09/09

Sep 09, 6:28 am

Gold futures have been trading flat for the week despite the market sentiment taking on risk as the commodity currencies have made strong gains this week already. Gold was trading flat at 0.01% for the week at the time of writing. The flat move in the precious metals market is likely to remain sideways into the run up to the Fed’s FOMC decision next week. China reported an increase in Gold purchases this week to $61.8 billion despite falling currency reserves since August but the news did not have much effect on the markets.

On the weekly chart, the bullish divergence is starting to get more evident as the RSI has failed to confirm the lows in Gold. A potential correction is very likely which could see Gold prices eventually rally to the $1220 region of support to establish resistance. Price action in Gold, on the weekly charts is also trading below the falling trend line and could possibly point to a break of the falling trend line as well.

XAUUSD – Weekly Chart, 09/09/2015
XAUUSD – Weekly Chart, 09/09/2015

On the daily chart time frame, the longer term bearish flag has so far seen prices decline to 1080 lows from which, Gold saw a strong bounce. To the upside, there is a possibility of a pending retest to the broken support at 1180 – 1175 region for resistance but one which is likely to happen on a decline down to the lower support at 1098 – 1100 region. Plotting a falling price channel to the price action on the daily chart, we can see that resistance has been established at 1150 level of support/resistance. Assuming that the resistance at 1150 holds for now Gold prices could likely fall to 1100 region.

XAUUSD – Daily Chart, 09/09/2015
XAUUSD – Daily Chart, 09/09/2015

Silver futures have fared better over the week compared to Gold, with Silver prices up 1.78% for the week. However, price action remains biased to the downside after the head and shoulders pattern that was formed on the daily charts. Price action in Silver has so far managed to decline below the 127.2% and reversed its losses just shy of a few points away from the 161.8% measured move target of the head and shoulders pattern. To the upside, the rally could potentially retest the neckline of the head and shoulders pattern at 15.51 while the head and shoulders pattern could be completed on a decline to 13.76. We expect to see prices continue to move sideways.

XAGUSD – Daily Chart, head and shoulders pattern
XAGUSD – Daily Chart, head and shoulders pattern

On the H4 charts for Silver, the bounce off the short term support at 14.58 – 14.4 has seen a rally which has tested the next resistance at 14.95 – 14.85. At the time of writing, price action has formed a doji candlestick pattern at the resistance level. If the next candlestick closes bearish, Silver prices could potentially fall back to the lower support with the possibility of a further decline down to the main target t 13.76. To the upside, if Silver manages to close above 14.95, a retest to the head and shoulders neckline at 15.51 could become a possibility.

XAGUSD – H4 Chart, 09/09/2015
XAGUSD – H4 Chart, 09/09/2015
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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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