Gold Takes Another Step Towards Bearish Continuation

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Gold Takes another Step Towards Bearish Continuation

Last week, we saw gold take the first step towards bearish continuation.

When we look at the 4H Chart, we can see that after a rally in October from 1183 to 1255. gold price started to retreat. The first step in bearish continuation was the break below October’s rising trendline. This price action also brought price back into the moving averages, taking away the bullish bias. The m ain thing was price action making a lower low of significance for the first time in October.

Gold (XAU/USD) 4H Chart 10/28
gold4h10282014

(click to enlarge)

Today, it looks like gold price price is taking another step towards the bearish continuation scenario as it broke below the 2, 3-session consolidation. This price action shows respect to a newly formed falling speedline, and is also about to clear below all of the 200-, 100-,  and 50-period SMAs. That price action would re-open the 1183 low on the year with risk of falling even further.

Heading into the FOMC decision and statement, gold is being bearish. But if the USD starts to fall across the board after the statement, see what happens to gold (XAU/USD) around 1240. If price can hold below 1240, preferably 1235, the bearish continuation  scenario would still be valid. A break above 1240 however would suggest further consolidation and bullish correction in the short-term.

Silver price also consolidated in October, but did not rally as sharply as gold did, forming more of a sideways range as we can see in the 4H chart.

Silver (XAG/USD) 4H Chart 10/28
silver4h10282014

(click to enlarge)

As gold signals bearish continuation, silver has been gently sliding toward the 17.00 handle, right above which we have some common range lows. A break below these lows show open up the 16.67 low with risk of further downside.

If price instead pops up above 17.35, silver is likely to extend October’s consolidation mode, or even put in some bullish correction. Still the upside will first be limited to the 17.80 consolidation high.

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