Gold Advances while Silver Continues to Consolidate

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Gold Advances while Silver Continues to Consolidate

Gold Shining in October: After finding a low on the month at 1183, gold has been bullish. Today, it pushed above last week’s high around 1250, and hit 1255 before stalling during the beginning of the 10/22 session.

Gold (XAU/USD) 4H Chart 10/22
gold 4h chart 10/22

(click to enlarge)

More Bullish Signals: In the 4H chart, the most important observation is the higher highs and lows, and the fact that the price just broke above a flag pattern. The RSI does not show strong bullish momentum, but does reflect a loss of the bearish momentum heading into October.

Bearish Scenario: Now, a break below the 1248 pivot might bring some near-term bearish correction, but the bullish outlook in October remains intact until a break below 1230. Then we will have the first lower low of significance.

Gold (XAU/USD) Daily Chart 10/22
gold daily chart 10/22

(click to enlarge)

Bullish Correction Scenario vs. Key Resistance: Otherwise, if the rally continues, the next level to monitor for resistance will be in the 1270-1280 area, which was a common support going back to April, and more recently a resistance seen in early September. Price will also test a falling trendline coming down from July’s 1345 high. with the prevailing trend being bearish, we should anticipate bearish continuation with a break below 1330, or sellers if price extends October’s rally toward the 1270-1280 area.

Silver (XAG/USD) 4H Chart 10/22
silver 4h chart 10/22
(click to enlarge)

Sideways Consolidation: Silver did rally in October from it’s 16.67 low, which is also the low on the year so far. However, the rally was only to about 17.72 before price started to settle into a sideways range.

Breakout Scenarios:
A break above 17.80 will be needed to introduce further bullish correction as it would clear the October high and the 200-period SMA in the 4H chart.

A break below 17.00 however might revive the bearish outlook first to the 16.67 low, and possibly lower because the prevailing downtrend would still be intact.

Silver (XAG/USD) Daily Chart 10/22
silver 10/22 daily chart

(click to enlarge)

Falling Trendline: Now, it should be noted that even if price does push above 17.80, the 18.00 handle will be a key resistance. The daily chart shows a falling trendline from the July high of 21.57. Now, a break above 18.00 and the trendline might be a stronger bullish signal, especially if price starts showing support at or around 17.50.

Bearish Continuation Scenario: Below the 16.67 level however, the next key support might be the 14.63 2010-low, up to the 15.00 psychological level.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.