Gold Leaning Towards 1240; Silver Approaching the 2014-Low

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Gold Leaning Towards 1240; Silver Approaching the 2014-Low

Gold (XAU/USD)

Gold continues to be bearish this week. It has been extending a decline from about 1340 in July, which ended up breaking below the 2014-triangle support in September. As we progress through the month, we saw a test of the triangle support as resistance and the market confirmed the bearish breakout. Gold is now approaching a support pivot from June at 1240. As the RSI also approaches the oversold territory, we might anticipate some consolidation around 1240 before further decline. If there is a pullback, we should probably limit the bullish outlook and expect sellers in the 1270-1280 support/resistance pivot area. There is still downside risk first toward a common low around 1220, then the 2014 low around 1183.

Gold (XAU/USD) Daily Chart 9/11
gold daily chart 9/11

(click to enlarge)

Silver:

Looking at the silver chart, we can see that price is already approaching the 2014-low at 18.64. There has not been any significant bullish correction, and consolidation periods have been at most a week or so since the decline from about 21.50. Now as price approaches the low on the year, and as the RSI digs into oversold territory, we should expect some consolidation around 18.64, at least comparable to the couple of week-long consolidations in August.

Silver (XAG/USD) Daily Chart 9/11
silver daily chart 9/11

(click to enlarge)

Now if price climbs back above the 19.37 level, we would see a break above a declining trendline, and should anticipate a meaningful bullish correction at least toward the 20.00 handle. After all, silver price has been more or less sideways in 2014. Still, we should keep a bearish bias because the prevailing trend before 2014 was bearish, and price has been in a descending triangle since 2013, as we can see in the weekly chart below.

Silver (XAG/USD) Weekly Chart 9/11
silver weekly chart 9/11

(click to enlarge)

We should also note that in the weekly chart, the moving averages are in bearish alignment and price is below all of them (200-, 100-, and 50-week). Also, the RSI has remained below 60, showing maintenance of the prevailing bearish momentum. One more thing – we are seeing higher RSI highs, with correspondingly lower price highs. This is call the negative reversal signal, and suggests further downside.

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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.