Stalking the Consolidation in Gold and Silver

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Stalking the Consolidation in Gold and Silver

Gold and Silver have been bearish since the end of January. They are both starting the week in consolidation patterns. Let’s take a look at the charts and prepare for the breakouts.

Gold (XAU/USD) 4H Chart 3/17
gold03172015h4
(click to enlarge)

The 4H gold chart shows price falling since the high on the year at 1307. Price has been trading under a falling trendline. The 200-, 100-, and 50-period SMAs have turned to slope down and are in bearish alignment, with price trading under all of the SMAs at the moment.

We can see a consolidation since last week after price tagged 1147. If price falls below 1145, the bearish trend remains in play with the 1130 low on the year in sight, and with risk of breaking lower at least toward the 1100 area.

If price pushes above 1185, gold would likely be in short-term bullish correction, but within the medium-term downtrend. In this scenario, we should monitor for resistance around 1190-1197. This area represent the lows from a previous consolidation and is likely reinforced by a falling trendline from 1307, especially if the 4H RSI stalls around 60 (which is a sign the bears are still in charge).

A break above 1200 might shelve the bearish outlook for a medium-term sideways mode. Otherwise, if price can hold below 1190 or return below it after a brief crack, the bearish scenario will remain in play.

Silver (XAG/USD) 4H Chart 3/17
silver03172015h4b
(click to enlarge)

The 4H silver charge is very similar to gold’s 4H chart above, so I will skip the general technical assessment.

A break below 15.45 would open up the bearish continuation scenario, with pressure on the 15.29 low from last week, and with the 14.65, 2014-low in sight. With the prevailing downtrend in 2014, and going back to 2011, intact, there is still downside risk beyond 14.65 to at least 14.00.

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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.