Gold, XAU/USD, Silver, XAG/USD – Technical Outlook:
- Gold continues to flirt with key technical support.
- Silver has consolidated after a decent rally this month.
- What is the outlook and what are the key levels to watch for a change in trend?
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GOLD TECHNICAL FORECAST – BEARISH
The lack of follow-through price action in spot gold after last week’s break below vital horizontal trendline support at 1676 (coinciding with the 200-week moving average) raises some doubts about the reliability of the bearish signal. However, stalling after the break is not a sufficienton its own to conclude that the move was a false one – it could well imply a lag. While the yellow metal holds below 1676, the follow-through decline could occur next week or in due course.
For a false break to occur, like the one in silver recently (see chart), gold must at the very least rise above the September 15 high of 1698 – an outside chance highlighted last week. So far that has not occurred even on an intraday basis. Hence the short-term outlook for gold remains bearish. A rise above 1698 could pave way towards the September 12 high of 1735.
From a big-picture perspective, a decisive break (at least two weekly closes) below 1676 would trigger a double top pattern (the 2020 and 2022 highs), pointing to a potential fall towards the 200-month moving average (now at about 1292). There is quite strong support at 1620 (the 50% retracement of the 2018-2020 rise), followed by 1510 (the 61.8% retracement).
XAU/USD & XAG/USD Daily Chart
SILVER TECHNICAL FORECAST – NEUTRAL
Silver’s overall neutral bias from last week remains unchanged . As noted then, the multi-month slide has been losing steamon higher timeframe charts, raising the prospect of sideway conditions in the interim. From a few weeks’ perspective, 17.50-21.00 is a potential range, notwithstanding this week’s sideways price action that gives an impression of an even narrower congestion zone.
After the sharp rally earlier this month, silver has consolidated below key resistance at the psychological and technical 20.00 mark (which includes the September 12 high). It is critical for silver to break above this resistance if the overall recovery structure since the start of the month has legs. Such a break could open the way towards 21.00 (the August high, roughly coinciding with the 200-week moving average).
On the other hand, a decisive break below the September 16 low of 18.76 would indicate that this month’s rebound was a dead-cat bounce, raising the prospect of a retest of the September 1 low of 17.53. Furthermore, a decisive break below 17.53 would be a sign that silver had resumed its medium-term downtrend.
XAG/USD 3-Hour Chart
–— Written by Manish Jaradi, Strategist for DailyFX.com