Gold testing $1200
Gold futures continued their rally as noted in our previous weekly analysis report. Price gained close to 1.4% since the start of the week after last week’s candlestick closed in a bullish engulfing pattern. We had noted that Gold prices are likely to stall near the $1200 mark and currently price is trading quite close to this level at 1199.66. From the daily charts, one should note that there is been a sharp rally with literally no down days for Gold for the past 6 days and this indicates that we could expect to see a correction any time soon.
In regards to whether Gold prices will reverse near 1200, given the current bullish momentum, we should be expecting a retracement or a correction to this short term trend at the very least and this correction could possibly give more clues. From the 4-hour chart for Gold below, we notice how easily price broke through the resistance level of 1183 – 1187 and this could now be tested for support if 1200 acts as resistance on this first touch.
An alternate view to bear in mind is that a break out above 1200 could see Gold test the next resistance level at 1220 – 1222 levels
From the weekly charts, there haven’t been much of developments as price action continues to trade within the range of 1200 and 1171, a major support zone for the descending triangle pattern. It will be interesting to watch how price plays out on the weekly. A bullish close above 1200 will probably pave way for a move higher and 1200 could turn to support which could see another leg higher.
The current rally in Gold futures and Silver for that matter seem to stem from the weakness in the US Dollar Index, which has been somewhat shaken after the FOMC meeting last week. The weakness however is most likely to remain a correction until proven otherwise which infers that the current rallies in Gold and Silver is most likely a period of correction to the downtrend.
Silver breaks above $17
The price action in Silver hasn’t been that dramatic as we notice that most of the bullish move seemed to have completed the week before. So far, this week Silver prices barely moved from a weekly perspective, but price is comfortably trading above 16.84 levels.
From the daily charts, Silver is back near the support/resistance price zone of 17 and 16.8 levels and this could prove to be critical for this pair. A continuation higher could possibly open up the way for more gains, while a reversal from this level could set the stage for a decline towards 16.24 and eventually breaking below the previous support lows of 15.32 and down to 14.9.
