Gold and Silver Prices Coiling and Consolidating

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Gold and Silver Prices Coiling and Consolidating

The previous metals, gold and silver made another leg down at the end of October/beginning of November, but both are consolidating¬†since at least the beginning of this week. Let’s take a look at the consolidation structure, and what we can say about the outlook from a technical perspective.

Gold (XAU/USD) 1H Chart 11/12
gold 1h chart 11/12
(click to enlarge)

In the 1H chart, we can see that price surged from a new low on the year near 1130, up to almost 1180 to start this week. In the 1H chart, the RSI popped up to 80, showing bullish momentum. However, the RSI has dipped below 40, showing that the bullish momentum is not being sustained.

Price has retreated from 1180, which was the previous 2013-2014 low, broken at the end of October. However as we enter the 11/12 session, price is rallying again above the cluster of SMAs. We can see a coiling, or triangle pattern forming.

At this point, it gold is neutral-bearish: Neutral because it is consolidating in the 1H chart, but bearish because of the prevailing trend. A break below 1150 at this point, might trigger another bearish leg, or at least an attempt to break below 1130.

A break above 1175 however, puts pressure on 1180, with risk of breaking toward the 1200 handle.

Silver (XAG/USD) 1H Chart 11/12
silver 1h chart 11/12
(click to enlarge)

Silver’s consolidation has a slightly more bullish bias then gold’s triangle. The 1H chart shows price trying to confirm a bottom that formed in the second half of last week. The consolidation looks less like a triangle, but more like a 2-steps of consolidation¬†ranges, each a couple of sessions long so far.

Also, the 1H RSI has tagged 70, and held above 40, which shows maintenance of the bullish momentum in the 1H chart.

At this point, a break below 15.45 could open up a bearish continuations scenario, or at least an attempt to test the 15.00-15.05 area. A break above 15.90 should open up common resistance around 16.20. I am conservative on the bullish outlook because the prevailing trend is bearish, and there has not been any evidence the USD will relinquish its strength except for the very short-term.

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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.