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Gold/Silver: The real levels Gold and Silver traders need to watch

Commentaries & Views

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.

Having the flexibility to enter and exit the market quickly makes it essential for Precious Metals investors to have a futures trading account alongside their core Physical Precious Metals holdings. If you are interested in speculating on the rise and fall of the price of Precious Metals on a shorter-term basis, such as two weeks or two months, or If you have never traded futures or commodities, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.

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.