Gold and Silver – Choppy but Bearish While Awaiting Breakouts

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Gold and Silver - Choppy but Bearish While Awaiting Breakouts

Gold and Silver prices have been retreating since last week. Let’s catch up with the technical developments of these precious metals.

Gold (XAU/USD) 1H Chart 4/1
gold 1h chart 4/1
(click to enlarge)

The 1H gold chart shows that after falling from 1219.76 down to 1178.41, price started to consolidate, but not before putting in some bearish signals.
1) Price fell below the 200- ,100-, and 50-hour simple moving averages (SMAs) – a sign of bearish reversal.
2) The RSI has tagged below 30, and has since held below 60 – a reflection of a market with bearish momentum.

Gold (XAU/USD) Daily Chart 4/1gold daily chart 4/1
(click to enlarge)

The daily chart shows a market that has turned sideways since the 2014-dip. In February however, there was a very sharp slide form 1307 down to around 1145. Here traders respected a previous support area, and price rebounded above a falling trendline. However, despite this bullish swing and a trendline breakout, the technical picture remains neutral-bearish, with emphasis on the bearish component. The two points in the 1H chart on moving average – price relation and the RSI apply to the daily chart as well, and suggest gold is poised to dig deeper towards the 1130 low on the year.

With that being said, we should monitor the consolidation range in the 1H chart favoring the bearish breakout and limiting the outlook of a bullish one.

Silver (XAG/USD) 1H Chart 4/1
silver 1h chart 4/1
(click to enlarge)

Silver slid last week from 17.41 to 16.45 at the start of this week. Note that price has fallen below the cluster of 200-, 100-, and 50-hour SMAs and the 1H RSI is holding under 60 after tagging below 30. Like the 1H chart for gold, this one for silver also reflects a bearish market. It is now consolidating  between 16.45 and 16.85.

Silver (XAG/USD) Daily Chart 4/1
silver daily chart 4/1
(click to enlarge)

The daily chart is neutral. The bearish component is not as strong as we saw in the gold chart. Still, if price falls below the current 16.85 low, it would return below the moving averages. The RSI does not show a strong bearish momentum, but it does show a lack of bullish momentum as the reading fails to swing back above 70.

When monitoring the range we saw in the 1H chart, we should favor the bearish breakout and limit the outlook for a bullish one.

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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.