Precious Metals – Weekly Technical Analysis, 02/12

Dec 02, 7:24 am
Gold in hands

The precious metals had a bearish month in November. Gold prices fell -6.82% for the month while Silver prices declined -9.52%. The precious metals continue to be weighed down by expectations that the Federal Reserve will hike rates at the December FOMC meeting, which has led to a stronger US Dollar and a continued slump in the commodity markets. Both Gold and Silver prices are trading near a 6-year low and remain biased to the downside.

Gold – Technical Outlook

The strong bearish candlestick on the monthly chart indicates that prices could resume a steady downtrend after nearly 3 months of consolidation within 1175.12 and 1072.52. The next significant support in Gold comes in at the psychological round number level of $1000 followed by $972 – $975 region.

On the weekly charts, there is scope for a potential correction which however needs to be validated. The median line analysis on Gold’s weekly time frame points to a correction towards 1117 region at the minimum, provided prices close on a bullish note on the weekly and preferably above the 1072 support. Failure to break above 1072 could however keep Gold biased lower. Also, watch for a possible inside bar or a bullish harami pattern on the weekly chart, which would be a near textbook example after Gold prices posted steady 6-weeks of decline.

Gold – Weekly Chart, 02/12. Watch for a potential inside bar or bullish harami pattern
Gold – Weekly Chart, 02/12. Watch for a potential inside bar or bullish harami pattern

Looking to the daily timeframe, the Stochastics are pointing to a bullish divergence failing to confirm the new low in prices, while posting a higher low in the process. The bullish divergence points to a minimum correction to $1100 which was a previously established support level and could potentially turn into resistance on a retest off the current lows. The daily chart also shows an inside bar along with a piercing line candlestick pattern formed earlier this week. A bullish breakout above 1072 could confirm this view for a move to the upside.

Gold – Daily Chart, 02/12. Possible bullish divergence correction to $1100
Gold – Daily Chart, 02/12. Possible bullish divergence correction to $1100

Silver – Technical Outlook

The monthly chart for Silver paints the same picture with prices staying near the $15.45 support of the ranging price action before last month’s strong bearish candlestick pattern. The weekly chart for Silver prices shows prices trading just above the median line. Last week’s candlestick closed with a small bodied spinning bottom pattern which could point to a short term shift in prices. This week’s price opened lower and a bullish close above last week’s open at $14.17 could signal a bullish engulfing pattern on the weekly charts indicating that Silver prices could be looking to a correction in the near term. A minor support/resistance level at $14.37 will be key as a close above this level could clear the way for a strong move to the upside.

Silver – Weekly Chart, 02/12. Watch for a possible bullish engulfing pattern
Silver – Weekly Chart, 02/12. Watch for a possible bullish engulfing pattern

On the daily charts for Silver, prices remain close to the main support level at $14.12. The price action near this support shows strong rejections on previous occasions indicating that Silver prices could be forming a short term base at this level confirmed by the bullish divergence on the Stochastics pattern. There is also a near double bottom formed at this level. To the upside, a break above 14.56 will clear the way for a possible test to $15.64. Failure to break higher is likely to keep Silver prices subdued with a possible new decline to the downside.

Silver – Daily Chart, 02/12
Silver – Daily Chart, 02/12
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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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