Gold Awaits Breakout; Silver Retreats

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Gold Awaits Breakout; Silver Retreats

Gold has been consolidating in November after reaching a new low on the year at 1130. The 4H chart shows a swing to 1178.75, then sideways action, before another swing to 1194.20.

Gold (XAU/USD) 4H Chart 11/18
gold 4h chart 11/18

(click to enlarge)

The bullish swing at the end of last week to 1194.20 is starting to form what looks like a price bottom in the 4H chart and also established a higher high and higher low. The 4H RSI pushed above to show loss of bearish momentum.

As we begin the week, gold price traded in a right range, roughly between the 1194.20 high, and the 1180 area. A break below 1178 might open up some near-term bearish outlook, but if gold is still in the bullish correction mode, it is likely to find buyers at or above 1160, where price will likely meet a previous support pivot and the rising speedline from the 1130 low. A break below 1160 then would revive the bearish outlook.

A break above 1195 would likely give the current bullish correction another leg up, but we should limit the bullish outlook to the 1220 area.

Gold (XAU/USD) Daily Chart 11/18
gold daily chart 11/18

(click to enlarge)

If price does reach the 1220 area, it starts to test a previous support/resistance pivot area, and a falling trendline. We should expect sellers here especially if the daily RSI approaches then stalls around 60. Price will have to at least break above 1250 to shift away from the bearish outlook.

Silver (XAG/USD) 4H Chart 11/18
silver 4h chart 11/18

(click to enlarge)

Silver rallied from its low on the year at 15.05 to about 16.50 in November. As it retreats to start the week, we should limit the near-term bearish outlook first to 15.75-80 area. HEre we have a support/resistance zone, and if the market is to continue the bullish correction attempt, we should see buyers here.

A break below 15.50 would open up the bearish continuation scenario. Otherwise, the current base action suggests some more upside risk in the short-term.

Silver Daily Chart 11/18
silver daily chart 11/18

(click to enlarge)

In the short-term, we should also limit the upside risk first to the 17.00 handle. On the daily chart, we can see that this was a previous support pivot, and near the 50-day SMA. Price would also be tested by a falling trendline. A break above 17.00 might open up another leg of bullsih correction, but a break above 18.00 might be needed to shift the medium-term outlook away from the bearish mode.

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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.