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Silver Price Outlook: Gold, USD Highly Correlated and in Confluence

Silver Price Outlook: Gold, USD Highly Correlated and in Confluence

Paul Robinson,

What’s inside:

  • Gold reaches first objective (support), while DXY at resistance
  • Correlation and support put precious metals at risk of bouncing
  • On that, while silver not at support it is also at risk of a recovery bounce

What’s driving volatility in precious metals? Find out in our market forecasts.

On Friday, we were discussing the failed rallies in precious metals as an indication for expecting lower prices ahead. Gold reached the December trend-line, our first objective, while silver hasn’t quite hit the targeted confluence of trend-lines from December 2015 & 2016.

Gold at support brings some pause to new short positions, especially when we take into consideration the technical confluence we are seeing with the US Dollar Index (DXY). The one-month correlation is a strongly negative 82%. Typically, we view the correlation second-hand, but when there is a clear-cut relationship and technical confluence, we pay mind. If the relationship maintains, and we see a turn lower in the dollar then a bounce back towards the 1260s could take shape. If the trend-line fails and DXY can cross its own levels of resistance, then we will look to the 200-day at 1236 and the March/May trend-line close to 1230.

Gold: Daily

DXY: Daily

With gold at support and the dollar at resistance, despite silver not having yet met the confluence of support making up our down-side objective, we must be on the watch-out for a recovery bounce. Should the before-mentioned technical backdrop fall apart, then we look for the trend-lines extending higher from December of 2015 & 2016 to be met in the 16.30/20 vicinity. A break below there and we’ll be looking to the May low at 16.07, and then the December low at 15.64.

Silver: Daily

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---Written by Paul Robinson, Market Analyst

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.