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Trading the Gold Price Range, What to do About Silver

Trading the Gold Price Range, What to do About Silver

2018-05-10 09:30:00
Paul Robinson, Currency Strategist
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Gold/silver technical highlights:

  • Gold trying to hold bottom of YTD range
  • Tactical considerations for trading the range
  • Silver too erratic at the moment to get a handle on

For a longer-term fundamental and technical outlook on Gold or any of your favorite markets/currency pairs, check out the DailyFX 2Q Forecasts.

Gold trying to hold bottom of YTD range

Since the first of the month, gold has been in a dog fight at the bottom of the range dating back to the beginning of the year. So far, we have seen one strong push off the area just above 1300 and the past two days have held strong rejections bars. Worth noting as well, the 200-day MA runs through recent lows, fortifying importance of price support.

Tactically speaking, what are we to do here? There are a couple of approaches one can take. If range-trading is part of your methodology, longs at this juncture are attractive from a risk/reward perspective. A breakdown is about $10-12 away, while potential for a trade back to the top of the range or 2013 trend-line on the weekly offers a potential $30-50+ from current levels.

If trading ranges isn’t your thing, then there is only one thing to do here – nothing. Should we see a daily close below 1300, then a breakout trade could be in store. Keep in mind, though, not that far below is a steady trend-line rising up from December 2016. This means entries should be fairly close to the point where the breakdown occurs. If gold were to snap hard and close a day down near 1290, not far from the trend-line, then risk/reward there would be unfavorable.

The breakout trade is really geared more towards the short-term, nimble trader, while the range trade is more for the swing-trader who is willing to hold for a few days to a couple of weeks.

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

Gold Daily Chart (Trying to Hold Bottom of Range)

gold daily price chart, at bottom of range

Silver too erratic at the moment to get a handle on

Gold has been a relatively difficult handle, but silver is starting to make trading it’s big brother look easy. Silver’s price action has once again become too erratic for this market participant. On this end, gold has the better edge at the moment with a clearly defined range and support at hand. Silver will one day provide a good look, but for now exercising patience looks to be the most prudent play.

For those trading silver, a move down in the precious metals will have the July trend-line in focus again, a line it held on 5/1. Looking higher you have the 200-day around 16.78 as resistance, followed by trend-lines from July 2016 and April 2017.

Silver Daily Chart

Silver daily price chart, erratic price action

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---Written by Paul Robinson, Market Analyst

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