Last week, metals continued to rise further, Gold managed to post a new high of the year, while Silver underperformed Gold and remained far from this year’s high.
However, notable rally in Gold did not last. Gold took a nosedive over the past few sessions, losing around $30 in few days, declining all the way back from this year’s high to $1260 earlier this morning.
As for Silver, it also failed to sustain its recent gains, declining from $17.40’s all the way back to $16.85, posting five days of consecutive declines so far.
There are many factors to keep in mind for such unstable trend whether in Gold or Silver, fundamentally and technically at the same time.
You Have Been Warned Before
In our previous report, we made it very clear for Gold buyers when it was trading at the high of the year, saying “This is NOT the right time to buy gold”.
Back then, technical charts were heavily overbought on most timeframes, while fundamentals were supporting further gains. However, buying gold and metals in general at the high of the year is not the perfect idea, especially with the current political risk across the globe.
Gold Failed To Touch $1300
Gold has been trending higher, and again flirting with $1300. The big question remains for many traders is whether to build new positions for the rest of the year or is this just another teaser trap before the downside pressure resumes?
There is no short answer to such question for the time being. There are many factors involved, which we should keep an eye over the coming days.
From a fundamental point of view, the political and geopolitical tension across the board keeps the bullish outlook in place. However, the risk for the Gold rally would hit when such tension suddenly eases with no reason.
On the other hand, the world is waiting for the Federal Reserve decision later this week, which set to have the biggest impact on Gold and Silver, depending on the Federal Reserve statement, including the Fed’s decision, economic projection, the discussion about unwinding its balance sheet and finally the possibility for further rate hikes later this year.
Those are the fundamental factors that traders should keep an eye on over the coming days/weeks.
From a technical point of view, there are many scenarios. Some would say that last week’s top has led to a double top formation on the daily chart. This is theoretically true. Yet, the daily uptrend line remains intact.
Some would also say that this is another short-term retracement, before this year’s uptrend resumes, and I am leaning toward this opinion.
As long as Gold continues to trade above the previous bottom at $1214 which was posted on the 9th of May 2017, I would keep the bullish outlook unchanged.
At the same time, the decline comes after the technical indicators were heavily overbought and a retracement was needed.
On the very short term, traders should keep an eye on today’s lows as it represents a solid support area, as it used to be a former resistance level back in February. In addition, its confluence by 50 DAY MA, where buyers are likely to appear.
A Breakthrough that level would mean a deeper retracement, which might continue towards 1240’s area, where the 100 DAY, 200 DAY MA’s and the uptrend line is located, where buyers are likely to appear once again to defend the trend.
Disclaimer: All information provided is an opinion and is for informational purposes only. It is not intended to be an investment advice.