What’s inside:

  • Silver and gold price contraction setting up for volatility to come shortly
  • Silver has the cleaner of the two patterns, but need to wait for breakout rather than predict
  • Moves could be fairly substantial once we finally have a resolution

What is expected to drive Gold & Silver into year-end? To find out, check out the DailyFX Q4 Forecast.

Both major precious metals – gold & silver – are carving out solid-looking symmetrical triangles, with the latter having the cleanest pattern. This sets the sector up for a move to come shortly. We’ll start with a look at silver since conviction is highest in its formation based on symmetry.

The contraction began over a month ago, with price swings now bringing silver very near the apex of the triangle. A breakout looks to be within days at most. The patterns hold a neutral bias at this juncture, but with the underside trend-line of the formation extending higher since July, a breakdown may prove to be the most powerful possible outcome. On the top-side, the 200-day MA has been helping shape the triangle, with yesterday’s rejection-day the most recent attempt to cross above. Whether the break comes lower or higher, the height of the pattern points to a measured move target (MMT) of about $1.35 from the apex. That could put silver at the September high or on approach of the July low. In either event, the move looks likely to be material.

Silver: Daily

Silver daily chart

Naturally, if one precious metal is in the process of making a big price move, or contracting in this case, then the other is doing similar. The symmetrical triangle in gold isn’t quite as clean in silver, but nevertheless the same outcome is anticipated once a breakout is confirmed. There is a key trend-line rising up from the December low which is in confluence with the apex of the triangle, and the 200-day MA aligns not far below. A breakdown out of the pattern would also require the December trend-line to be broken and the 200 is not likely to hold. The measured move targets (MMT) are ~1323 on a top-side breakout and ~1225 on the down-side. The key, again, is to wait for a confirmed break before taking action. Anticipating the breakout, or even worse ‘flip-flopping’ with each price swing can lead to unnecessary losses. It's best to take a reactionary approach with these patterns.

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Gold: Daily

Gold daily chart

For more technical analysis articles written by Paul, see his bio page.

---Written by Paul Robinson, Market Analyst

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