Gold (XAU/USD) started the week trading within a near-term range between 1273 and 1282.80. It is also holding just above a triangle trendline that connects the 2014-low around 1183 with the June low around 1240.
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Also note that the 1270 handle was a common low from April through May. Therefore, a break below 1270 should break below key support factors, and open up the 1240 pivot, and the 1183 low on the year.
However, if price climbs back above 1285, the bearish outlook might need to be shelved. Price would be back at the crossroads within the 2014-triangle. The mode would remain sideways until a break above or below the triangle. A break above 1320 will likely crack if not clear the triangle resistance. In this scenario, the the market should first open up the 1340 resistance from July, then the 2014-high around 1392.
While gold remained in near-term consolidation, silver drifted low and barely eked out a new low on the month. When you look at the daily chart, silver looks entrenched in a bearish trend since 21.50, trading in a falling channel toward the low on the year just above 18.50. The 19.00 handle could be a short-term target as well, and we might start seeing buyers here especially if the daily RSI reading dips below 30. The RSI has not done so yet, so there is still room to fall before traders see an oversold condition in the daily chart.
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With such a strong downtrend developing for a little over a month, a break above the 20.00 handle might be needed to shelve the outlook toward 19, then 18.50. A break above 20.00 would likely break above the channel resistance, and would put silver back into the sideways mode it has been in throughout the year – actually since July 2013.
At the moment, the more likely scenario would be a test of the lows in the 18.50-19 area.
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