Gold gains on dovish Yellen’s remarks

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Gold

Precious metals remained stronger, for the most part, this week in an attempt to regain the losses from last week. Gold prices especially surged yesterday following Janet Yellen’s dovish remarks on monetary policy after prices touched a daily low at 1215.45, with the $1200 handle proving to be elusive, while at the same time, the $1250 resistance to the upside continues to remain a price magnet for Gold. Eventually, spot Gold settled the day at $1241 an ounce. The moves in Silver were much more subdued with prices retreating off the daily highs at 15.35 to settle the day at $15.36. However, ignoring the short-term moves, the weekly chart for Silver and Gold both show a strong bearish candlestick pattern that was formed which could see the recent gains made earlier this week being wiped out. With the ADP report due today followed by the US nonfarm payrolls report on Friday and the ISM manufacturing data, precious metals could remain volatile, but the bias remains to the downside.

Gold – Technical Outlook

The weekly chart for Gold prices is continuing to trade near the $1250 handle, and it is likely that prices could remain range-bound in the near-term. However, unless Gold tests the $1200, further upside is likely to remain weak into the $1250 handle. Only a close above the $1250 could shift this bias to the upside, but with nearly four weekly sessions failing to break above $1250, the downside move to $1200 remains more probable.

Gold – Weekly Chart, price remains close to the $1250 handle
Gold – Weekly Chart, price remains close to the $1250 handle

The 13 period RSI continues to show a hidden bearish divergence being formed with the RSI still pointing to a higher high against price’s lower high in comparison to the highs of 1307 formed in the week of 18th January 2015.

On the daily chart, following the breakout and a retest of the rising wedge pattern, Gold is yet again looking to move higher. While 1250 will be important to watch in this aspect, the pattern which usually indicates a downside move in prices could be at risk. To the downside, if the bearish sentiment resumes then Gold’s losses could remain capped near the $1200 psychological support which could offer a short-term bounce in prices.

Gold – Daily Chart, rising wedge remains in play, for now
Gold – Daily Chart, rising wedge remains in play, for now

To conclude, the decline to $1200 support is likely to see prices remaining volatile but also highlights the fact that Gold could find strong support near the $1200 level on the first instance. A move above $1250 will invalidate the rising wedge pattern.

Silver – Technical Outlook

Silver prices have remained more subdued this week following last week’s strong decline. Silver prices are back trading near the $15.4 – $15.095 level of support. There is a possibility of prices forming a rising wedge pattern in Silver’s weekly chart as well, which will see Silver moving lower to the next support at $14.60 – $14.40 levels.

Silver – Weekly Chart, potential rising wedge pattern forming
Silver – Weekly Chart, potential rising wedge pattern forming

On the daily chart, the triangle pattern is more evident with prices falling off the $15.70 handle, which is likely to see a prolonged move lower towards $14.72 – $14.65 region. Prices remain currently capped near the lower median line, and we could expect a short term pullback to the declines. As long as Silver does not break 15.70 level, the bias remains for a move lower. The Stochastics on the daily chart is currently looking to make a bullish crossover close to the 20 oversold level which could validate the short-term pullback in prices on the daily chart.

Silver – Daily Chart, prices likely to pullback following the strong declines off $15.70
Silver – Daily Chart, prices likely to pullback following the strong declines off $15.70

In conclusion, Silver prices are likely to move lower towards $14.70 – $14.65 following the breakout near the $15.70 level. In the near term, prices could see a pullback to the declines, and as long as $15.70 remains capped, the bias remains to the downside.

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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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