Gold & Silver Update for 28th January
Gold Futures – Technical Update
Gold futures got a shot in the arm, largely thanks to the Swiss shocker. Ever since, (January 15th) the precious metal has been in a strong uptrend, leaving many bears either ending up closing their shorts or simply baffled. No sooner was the Swiss induced rally showing signs of fading, Gold saw a new reason to rally, from the ECB’s QE program. Ahead of the QE announcement, Gold rallied as much as $1300 before easing from the highs.
It was only earlier this week that Gold managed to ease back towards $1270 levels, but the uptrend remains strong.
The daily charts below shows the inverted head and shoulders pattern that was formed in the process. This inverted head and shoulders give a final target towards $1315.50. However, it is hard to figure out if the target will be reached considering that there has been little to no retracement to the neckline near the levels of $1250 – $1243.
In the likelihood of a retest to the neckline, we could probably get the first glimpse of Gold potentially testing $1300 levels, last seen only in August last year.
From the monthly charts, we notice price moving into a tight congestion phase. This would indicate a potential break out in either direction. To the upside, we have the immediate target of 1327, which if holds could still put Gold into the bearish trend. However a break above $1327 and preferably to $1394 could question the strength of the bearish trend in Gold. The monthly candlesticks continue to be bullish after November’s doji close followed by bullish close in December last year.
Silver Futures – Technical Update
Silver futures also managed to rally on the sudden shift in sentiment. However, price is yet to test the $18.58 level, which is now seen as critical. A close above this level could potentially put Silver into a short term uptrend, with the next target coming in at $21. If a support level is formed near $18.58, we could expect a further rally, as high as towards $26.11.
The weekly charts however show a possibility to decline towards $16.84 in the short term before prices rally to test the upper levels near 19.1 and 18.73 regions. This week’s close will contain all the answers as we notice that at the time of writing, the weekly candlestick is already shaping up to be a bearish engulfing. But we need to see a more conclusive close before drawing to any conclusions.
Technically, a modest decline to $16.84 makes it ideal from a weekly time frame for Silver to potentially test the highs of 18.7 or 19.
Today’s FOMC statement will probably be the main risk event for both Gold and Silver futures. With doubts now starting to come up in the validity of a Fed rate hike in June this year, any subtle hints showing a shift from the current expectations is likely to translate into both Gold and Silver staging a very strong rally.