Silver Opens at a 4-Year Low; Gold is a Step Behind

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Silver Opens at a 4-Year Low; Gold is a Step Behind

Last week, with the USD remaining strong after the FOMC meeting, silver and gold slid. Let’s first start with silver, which is now opening this week at a 4-year low.

Silver Breaks Year-Long Consolidation

The weekly chart shows silver breaking the 2013-low of 18.20 and is starting this week below 18.00, around 17.75, a low not seen since August 2010. The weekly chart shows a long-term bearish market developing. Since the 49.78 high in 2011, silver price has been falling, consolidating in 2012 and falling again in 2013, until that 18.20 low in July. Then after a little more than a year of consolidation in 2014, silver is continuing the downtrend. The moving averages, the RSI, and the price action itself are all in very bearish conditions.

Silver (XAG/USD) Weekly Chartsilver weekly chart 9/22

(click to enlarge)

When we look at the monthly chart, we can see that the next support is possibly around 16.00. If and when price approaches 15.00, we should start considering major support and expect another long period of consolidation.

Silver (XAG/USD) Monthly Chart
silver monthly chart

(click to enlarge)

Gold Approaching the 2013-Low

Gold is in a similar predicament as silver. It has also been trending down since 2011, when it made a record high of 1920.74. It also consolidated since July 2013, when it made a low at 1180.20. In the weekly chart, we see that the moving averages, and the RSI are both showing bearish development. Price is just a step behind silver in that it is still above the consolidation since July 2013.

Gold (XAU/USD) Weekly Chart

gold 9/22 weekly chart

(click to enlarge)

For gold, a break below 1180 would continue the downtrend since 2011, and open the next support area around 1040-1045. We should also anticipate at least some short-term consolidation around the 1100 psychologically sticky price level.

Gold (XAU/USD) Monthly Chart
gold 9/22 monthly chart

(click to enlarge)

We are in a general cycle of declining commodity prices. Other metals such as copper, palladium and platinum are all sliding, as well as other classes like oil, and dairy. A combination of rebound in commodity prices, and a pullback of USD-strength should be seen if we are going to shift our outlook for gold and silver from bearish to neutral.

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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.