Gold Initiates Bearish Continuation; Silver Sits Tight

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Gold Initiates Bearish Continuation; Silver Sits Tight

Gold prices (xau/usd) started the week bullish, making new higher lows, and highs. It is trading above its 200-, 100-, and 50-period SMAs in the 4H chart, a sign of bullish bias in this time-frame, and for October in general. However gold is heading into the weekend with early signs of a bearish continuation.

Gold (XAU/USD) 4H Chart 10/24
gold 4h chart 10/24

(click to enlarge)

After marking a high on the month at 1255.23, gold retreated. It got into the 10/23 session breaking below a rising speedline from about 1205, 10/7 low. It was a strong break as seen in the 4H chart, and price settled in the cluster of SMAs, hovering above the convergence of the 200-, and 100-period SMAs.

Perhaps most importantly, the break below 1230 ensures a lower low of significance for the first time in October. If price moves below the current support around 1226, the next area of support could be in the 1200-1205 are, a psychological level up to a previous common support level. With the prevailing trend intact, the pressure will remain toward the 1183 October low as well.

Silver (XAG/USD) 4H Chart 10/24
silver 10/24

(click to enlarge)

Silver has been bearish heading into October, marking a new low on the year at 16.67. Since then, it has rallied back to about 17.81. The 4H chart shows a range roughly between 17.80 and 17.05.

It’s interesting because in gold and silver’s downtrends since, silver has led, in that it has been more bearish, and has made new lows on the year while gold sits above its 2013-2014 lows.

This time around maybe gold is leading the way making the first move towards bearish continuation. Silver can catch up with a break below 17.00. Even if gold is leading, it would be nice to see silver fall below 17.00, to help further the case of a bearish continuation in gold. After all, both are metals priced in the USD, and commodity prices have been falling as a whole with strong positive covariance.

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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.