Gold and silver post the strongest gains this year

The risk aversion mood in the markets has made Gold a popular asset as a safe haven, leading many to wonder if the cyclical bearish trend in Gold is about to end. Prices tested the highs above 1255.4 last week but retreated strongly off these highs. While there is some sense of normalcy returning to the markets, there is no telling how prices will unfold especially in light of tighter monetary conditions and a general slowdown in the global economy. Silver prices too have seen one of the best rallies in recent times as prices managed to push above the $15 handle.

Gold – Weekly Technical Outlook

The technical outlook for Gold remains biased to the upside and points to further gains in the medium term. For the moment, the $1200 psychological handle has been well supported keeping Gold biased to the upside, but it is unlikely that we will get to see new highs in Gold, at least in the near term as prices point to a correction towards the $1100 – $1110 region ahead of resuming the bullish leg.

Starting with the weekly chart for Gold, prices remain within the longer term bearish falling price channel but supported above $1200 following a descending triangle break out inside the price channel. To the upside, next main resistance comes in at $1275 – $1285 region, which marks the highs off 11th January 2015 highs, while support is clearly stronger in the $1200 region. In the short term Gold prices could remain range bound and most likely, the weekly price action could see an inside bar being formed. Below the 1200 handle, there is scope for Gold to test the breakout price near $1142.5

On the daily chart, Gold prices could see another short term leg up with $1239 coming in as the level of resistance where there is also a pending down gap that is unfilled. As long as $1255 remains untested, Gold could simply waver within the $1239/1240 – 1200 levels. Below $1200, 1108 support comes into the picture.

For the moment, the daily chart for Gold does not show any divergence, but comparing price action to the Stochastics, the move to $1239 could potentially see a lower high being made in prices, which could lead to a bearish divergence, that points to a correction down to 1100 – 1110 region or 1108 to be more precise

To conclude, the rally in Gold prices is likely to be limited to now pointing to a correction to the $1100 region. In the longer term, establishing support at $1100 could see a new rally send Gold prices towards $1275.

Silver – Weekly Technical Outlook

Silver prices broke out above the $15.4 resistance but failed to rally towards the $16 handle. The current declines could see a similar pattern to Gold playing out. While prices are currently trading at the support/resistance level of $15.4 – $15, a break below this region could see a test back to $14.6  $14.4. Silver prices remain biased to the upside as long as $14.6 – $14 support holds while aiming for further upside to the $16 handle

On the daily chart, we can see the bullish momentum sending Silver prices to break above the outer median line to test the resistance near $15.7, which previously acted as support. Another leg higher could see prices retesting this level of $15.7 which could, in turn, see a correction take place. To the downside, support at $14.40 is one to watch for. A break below this support could however invalidate the bullish bias and keep Silver prices ranging sideways followed by a potential downside breakout.

To conclude, Silver prices are seeing a similar pattern to that of Gold where the longer term target to $16 is very likely but a correction down to $14.40 remains.