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Dips in precious metals prices may continue to be shallow

Jonathan Da Silva

Kitco Commentaries | Opinions, Ideas and Markets Talk

Featuring views and opinions written by market professionals, not staff journalists.

Commentaries & Views

Yesterday we suggested that traders stay nimble as pullbacks were at risk of remaining shallow. We also suggested that should jobs come in stronger than expected this morning, a pullback would be highly unsurprising.

As I type, both of those scenarios have/are in the process of playing out in gold; silver has already printed a new weekly high after this morning’s sell-off. Below is the daily gold chart showing the reversal in progress. Bulls should be ready to catch the next leg up to what this trader has already suggested will likely be $1,850, with some bumps along the way. If gold can close the week over $1,795 or better, $1,800, short positions could be in a lot more trouble, a lot quicker.

For anyone who has been keeping up, you have seen the below chart ad nauseum over the last few months. It is the weekly DXY chart. Note how important a signal of a long-term negative divergence between price and momentum can be. It’s playing out per textbook in the DXY right now. Also note how momentum began diverging from price as early as May of this year, with the index priced in the 104’s, just where we sit today.

This trader continues to believe that RSI will have to reach oversold conditions on the DXY weekly chart. Support, however, should be expected in the yellow highlighted area we have also been showing for months (also where the divergence occurred, not coincidentally).

Thanks and have a great weekend.

By Jonathan Da Silva

Contributing to kitco.com

Contact jdasilva@kitco.com
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.