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Gold, XAU/USD, Silver, XAG/USD – Technical Outlook:

• gold appears to have bottomed out in the short term.
• Silver could attempt a rise towards the top of the recent range.
• What are the key levels to watch?

GOLD SHORT-TERM TECHNICAL OUTLOOK – NEUTRAL

There is a growing likelihood that gold could bottom out in the near term and move higher towards the upper end of the recently established range.

In recent weeks, XAU/USD is struggling to break the 2021 horizontal trendline at around 1675-1680, which roughly coincides with the 200-week moving average. If the yellow metal closes around current levels this week, it would be the third leggy candle in a row on the weekly charts, implying support at lower levels not too far from 1675-1680 (see chart).

XAU/USD weekly chart

Chart created with TradingView

However, XAU/USD must at least break above the immediate resistance at the 1675 end-October high for the immediate downside pressure to ease. The recent stalling of the downtrend could also be interpreted as a pause for digestion before gold embarks on its next descent.

Any break above 1675 could push the metal towards a rigid barrier at the top of a falling channel starting in June, roughly coinciding with the 89-day moving average. This combined resistance has limited the rallies of the last few months (see chart). There is a stronger hurdle at the early October high of 1729 which may be difficult to break as the trend on the longer term charts remains bearish.

XAU/USD daily chart

Chart created with TradingView

SILVER SHORT-TERM TECHNICAL OUTLOOK – NEUTRAL

The setup on the weekly chart for silver appears to be like gold, albeit of longer duration than the yellow metal. Since July, XAG/USD has ranged 17.50-21.25, holding above horizontal trendline support from 2019-2020 highs, with 200-week moving average capping the upside.

XAG/USD weekly chart

Chart created with TradingView

Like gold, XAG/USD could be set for a slight rise towards the top of the range in the short-term. It has repeatedly tested for the past few days and failed to break the immediate barrier at last week’s high of 19.80. A decisive break above this resistance could propel XAG/USD towards 21.25, near the 200-day moving average (now around 21.50).

Beyond the short term, however, the balance of risk is on the downside. There is a tough resistance at 21.25-21.50 (including the 200-day moving average) and silver would need to break this resistance for the medium-term downside pressure to ease.

— Written by Manish Jaradi, Strategist for DailyFX.com