Gold and silver prices shot up at the end of last week after some initial bearish continuation signals. These metals are likely in a medium-term consolidation. We might expect some more consolidation/correction this week, but we should anticipate sellers on the rallies.
After a low on the year at 1130, gold rebounded. After the first swing, price held below 1180, respecting a previous support. Then after a triangle pattern, price started to signal bearish continuation but was quickly reversed but a strong rally that pushed past 1180 and cracked the 1190 handle. Price also broke above a falling speedline from October’s high of 1255. The RSI clearly broke above 60, showing loss of bearish momentum.
The daily chart shows that the 2 strong swings were made of daily candles which were outside bars compared to preceding candles. This suggests gold has met a strong support and should be in consolidation with some upside risk to 1200 and beyond.
Where should we expect sellers? As price approaches 1220, we should anticipate sellers, up to the 1240 level and the falling trendline from July. We should also look for the daily RSI to return to 60 and stall. If it does stop at 60, we can anticipate a bearish continuation attempt, IF gold is still bearish.
If gold breaks above 1240, then we might have to consider it shifting to neutral and no longer bearish.
For silver, let’s jump right to the daily chart because it is in a similar scenario in the short-term. In the medium-term, the technical picture is also similar in that the pair has been bearish at least since July, and that we recently had 2 bullish outside bars representing a mode of consolidation/correction.
For silver, there is upside risk toward 17.00 area. Here, price will likely meet a falling trendline from July’s 21.57 high as well as a previous support pivot. If the RSI is also near 60 and stalls, we should anticipate a bearish continuation attempt at least back towards 15.05-15.50.
A break above the 17.05 area might shift silver from the bearish mode since at least July, to a neutral one.
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