Precious Metals Charts – Gold Back to Support, Silver Breakdown?

Gold/silver technical highlights:

• Gold range-trading continues, support may be back in play
• Silver trading towards confluence of support, but may not hold

See what factors are expected to drive Gold this quarter in the DailyFX Q2 Forecasts.

Gold range-trading continues, support may be back in play

No pun intended (yes intended), gold is heavy again, however; the range it’s been stuck in year-to-date has made trading difficult. It’s a market to generally avoid unless trading at the perimeters of the range (buying support, selling resistance).

Currently, gold is sitting close to the middle of the range, presenting poor risk/reward for either side of the tape. There is a trend-line running just below, but it lies within the middle of the range and not far away from the pesky 2013 trend-line which keeps capping advances on a weekly closing basis. Again, risk/reward not favorable.

A break of the trend-line, however, could bring into play a big area of support in the vicinity of 1310/03. This has been a very active reaction zone with its beginnings dating back to October. A drop and turn in momentum from support (bottom of the range) may offer traders another opportunity for a range-fade.

Should it break, though, then look for acceleration as the ongoing range at some point is set to lead to a sizable move. This goes for the upside, maybe even more-so, given it would also constitute a significant break of the 2013 trend-line.

Traders remain long gold, check out the IG Client Sentiment page to see how this acts as a contrarian indicator.

Gold Daily Chart (range persists)

Gold Weekly Chart (2013 trend-line keeps a lid on it)

Silver trading towards confluence of support, but can it hold?

Silver is stuck in its own, narrower, downward sloping trading range. The channel is marked by lower-lows and lower-highs, which hints at the possibility of seeing a downside break develop. There is good support by way of the lower parallel in confluence with the July trend-line, but if gold trades back to the low-end of its trading range we might see a breakdown. If that happens, look for the December low at 15.62 as the next level of support.

But before we jump the gun on shorts, waiting for a break is the prudent approach. Support will be respected for as long as it holds, and if buyers show up upon a test it may offer would-be longs a low-risk spot to enter with stops set below support.

Silver Daily Chart (bearish channel, confluence of support)

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---Written by Paul Robinson, Market Analyst

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