Gold/Silver: The real levels Gold and Silver traders need to watch
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The Precious Metals markets started and ended the week with a negative tone after Gold came within striking distance of its all-time high from August 2020 at $2075/oz. Precious Metals traders are shifting their focus from the banking crisis "safety trade" to a declining U.S. Dollar "store of value" trade. While the U.S. Dollar has been declining and entered its fourth bear market over the past 50 years, traders must remember that the Fed has a 60% chance of raising interest rates by 25 basis points at the next meeting on May 3rd. The technical picture of the U.S. Dollar shows the market is testing a critical support level from the February lows.
Daily U.S. Dollar Chart
Weekly Silver Chart
Daily May Silver Chart
Despite Friday's 2% decline, we remain cautiously optimistic as most technical indicators show the market substantially "overbought," as seen through the slow stochastic indicator. On a short-term basis, the technical backdrop shows Silver extending the "Bull flag pattern" we identified several weeks back while continuing to achieve new swing highs and breaking through the consolidation zone seen from December through February. The eight-day exponential moving average (EMA) has worked exceptionally well in helping Silver traders from a risk management standpoint and looking to reduce Silver exposure on the first close below. Traders then wait to see if an extended selloff occurs below our "Trend Neutralizer level" at $23.54/oz. If that event happens, we could be setting up for a multi-week correction and retesting the $20/oz. seen back on March 8th.
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Daily June Gold Chart
The technical backdrop in Gold shows a different picture from Silver as the market successfully "broke out" from the "Bull Flag" pattern we identified two weeks ago. However, without a continuation above $2060, traders should use any close below $2000 as the first warning sign that a correction could be brewing. A critical level we are watching is the March 21st downward spike low to 1965.9, now the first significant support. A break below 1965.9 will begin signaling a near-term failure, and our proprietary "trend neutralizer" level will fast approaching $1953. Any close below $1953 will shift trend traders to the sidelines, and they should wait for the next bull or bear trading signal. Therefore, we would be only cautiously Bullish and reevaluating upon such a move. For those working closely with us, most of you are working stops below the $1985 level on a "Good till Cancelled" basis.
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