Gold and Silver Remain Choppy but Bearish

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Gold and Silver Remain Choppy but Bearish

Gold and Silver have been wandering without direction for more than a month now. Let’s follow up on their messy price action and assess the technical set up.

Gold (XAU/USD) Daily Chart 5/5
golddailychart05052015
(click to enlarge)

When we look at gold’s daily chart, we can see that price has been consolidating since April between roughly 1225 and 1170. The larger picture is bearish but we can see coiling, so we can say the market has been bearish-neutral in the long medium-term.

The fact that price was unable to ascend above 1240 in April shows that bears are in charge after the “clear-out” above 1300 at the end of January. The 200-day SMA is above the 100-day SMA, which is above the 50-day SMA. Price has been trading mostly below these SMAs. Furthermore, the RSI has been holding below 60 after tagging 30. These are all signs that the market has maintained its bearish bias as it consolidates.

With the prevailing bias in mind, we should expect the market to sell on its current near-term rally this week, especially if the price comes back to the 1200-1220 area.

Silver (XAG/USD) Daily Chart 5/5/2015
silverdailychart05052015
(click to enlarge)

The technical conditions we noted for gold mostly apply to silver as well. Price is mostly trading under the 200-, 100-, and 50-day SMAs, which are in bearish alignment. The RSI has also held under 60 for the most part and thus reflects maintenance of the bearish momentum.

The difference is, there is a clear triangle shown in the silver chart and price is nearing the apex. This suggests we should anticipate a return to volatility soon (if we buy into the concept that the market cycles between high and low volatility.)

Either way, we should anticipate sellers if silver starts getting back into the 17-17.50 area, where it would be challenged by the triangle resistance in a neutral-bearish market

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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.