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Technical outlook on the gold / silver price
- gold set up to withdraw from about 200 days
- The silver price development looks downright bearish
Gold price and silver outlook: XAU and XAG are expected to decline
Gold has risen steadily even though the dollar is holding supply, which is a bit of a bullish sign. However, the 200-day and further dollar strength could derail the upswing. The price rise has formed a wedge formation which, coupled with a rebound from a low, suggests that a fall could set in quickly if the pattern’s lower trendline is broken.
The pent-up pressure caused by the narrowing price movement could very well lead to an upward pressure. What matters is which side of the formation is broken. If the lower trendline breaks, watch for gold to decline towards the May 2019 trendline, a threshold that has recently been tested and held. This would be another very meaningful test for gold as a breakdown could take it much deeper.
On the other hand, should gold continue to funnel up, it could break away from the 200-day trendline and rebound towards a trendline that is nearly a year old.
The bottom line is that there is a decent looking rising wedge to watch from the low that is likely to trigger a breakout one way or another.
Gold daily chart
Gold 4 hour chart
TradingView Gold Charts
Silver looks downright bearish at this point, much stronger than gold. The slump in mid-June after the Fed meeting aroused little buying interest and led to a sideways meander. This type of price move, following a strong move, usually indicates that some degree of follow-up is about to occur.
The 200-day MA has helped maintain a floor level during this congestion period, which has taken the form of a bear flag. There is some additional support not far below on a trendline that spans November. This line also coincides with the low of the most recent range at 25.52.
This results in an interesting setup.
With the price action pointing to another lower leg and another significant level of support nearby, we could see a relatively explosive move down if the support breaks through. We’ll want to pay close attention to how things play out on support (should it get it) as this could also end the weak phase quickly if a strong reaction develops.
For now, you’re running on a downtrend, and that tendency could either intensify significantly or be thwarted by testing another important level of support.
Silver daily chart
TradingView silver chart
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— Written by Paul Robinson, market analyst
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