Forex Trading Library

Precious Metals – Weekly Technical Analysis, 12/11

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Last week’s NFP report which sent the dollar surging and opening up speculation for a December rate hike sent the precious metals lower across the board. Gold futures declined -4.7% last week closing at 1087, while Comex Silver futures fell -5.47% to close last week at $14.69. While Gold has managed to slow its decline, Silver futures have posted an additional decline of -2.61% this week currently trading at $14.35. With the Fed back on track to pushing rates higher, the precious metals come under further pressure given the slowdown from China which has led to lower commodity prices across the board on reduced demand.

Gold futures have broken the technical support at 1100 – 1098 on the weekly chart but the declines could be sustained with the dynamic support coming in from the trend line marking the larger descending triangle. The Stochastics on the weekly charts could see a higher low being formed if there is a possibility of a reversal off the weekly charts in the medium term. This view could see a bullish momentum push prices higher eventually to 1156 on break above 1100 – 1098 region of support/resistance.

XAUUSD – Weekly Chart: Dynamic support off the falling wedge trend line
XAUUSD – Weekly Chart: Dynamic support off the falling wedge trend line

On the daily chart, the bearish momentum continues to play out as Gold treads closer to the 1084 – 1072 region of support, the July 20th lows from earlier this year. If prices manage to stall within this region, there is a scope for a move to the upside towards 1100 – 1098 as the initial target. However, failure to close above 1100 could see a renewed bearish leg in Gold which could threaten to break below the lower support at 1084 – 1072. The Stochastics oscillator on the daily chart remains well oversold so a short term respite in prices is likely in the near term.

XAUUSD – Daily Chart: Price close to the support zone (1084 – 1072)
XAUUSD – Daily Chart: Price close to the support zone (1084 – 1072)

For Silver, price action has dipped to a weekly low of 14.27 before easing back. The dynamic support formed by the descending wedge on the weekly charts is likely to see prices hold out for the short term. The descending triangle pattern has been re-adjusted to capture the recent highs near 16.05, made earlier in October. If the dynamic support off the descending wedge holds, a short term bounce could see Silver rally back to the broken support at 15.64 through 15.45 region to establish resistance and only a break higher will mark a bullish sentiment in prices.

XAGUSD – Weekly Chart, Break down of support at 15.64 – 15.45
XAGUSD – Weekly Chart, Break down of support at 15.64 – 15.45

On the daily charts, we notice a possibility for price to react to the August 26th close of 14.12, which shows confluence with the horizontal price level and the minor price channel. A bounce off 14.12 region could see prices target 14.56 support/resistance which, if cleared could set the stage for a strong rally to 15.64, marking a retest of the weekly broken support level to establish resistance.

XAGUSD: Daily Chart: Potential support at 14.12 – 14.3
XAGUSD: Daily Chart: Potential support at 14.12 – 14.3
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