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Precious Metals Technical Analysis: Gold and Silver Rebound at Hand?

Precious Metals Technical Analysis: Gold and Silver Rebound at Hand?

Daniel Moss, Analyst
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Precious Metals, Gold Prices, Silver Prices, XAU/USD, XAG/USD – Talking Points:

  • Gold and silver prices have been under fire since peaking in August
  • However, longer-term price analysis suggests the outlook for both precious metals remains skewed to the topside.

Gold and silver prices have taken a beating in recent weeks, weighed down by resilient economic data, positive vaccine results and the start of the US presidential transition process.

However, this correction lower may prove short-lived as longer-term price analysis suggests a reversal higher could be in the offing.

Gold Prices Weekly Chart – Cup and Handle in Play?

Gold prices weekly chart created using Tradingview

Gold prices have continued to track lower after failing to gain a firm foothold above key psychological resistance at the 2000 mark.

With the RSI and MACD indicator sliding to their lowest levels since March, the path of least resistance seems to favour the downside.

However, with prices carving out a bullish Cup and Handle pattern and continuing to track firmly above the sentiment-defining 200-week moving average (1495.80), the longer-term outlook remains tilted higher.

Nevertheless, a pullback towards the 50% Fibonacci (1763.27) looks likely in the near term if support at the 61.8% Fibonacci (1812.36) and 1800 level gives way.

Gold Prices Daily Chart – RSI Divergence Hinting at Rebound

Gold prices daily chart created using Tradingview

Zooming into a daily chart bolsters the bullish outlook depicted on the weekly timeframe, as gold prices hold constructively above the 200-DMA (1799.28) and 1800 level.

Bullish RSI divergence is indicative of fading selling pressure and hints at a reversal higher, if Descending Channel support remains intact.

A daily close back above the 61.8% Fibonacci (1812.36) would probably open the door for prices to challenge the November 9 low (1850.62).

Pushing through that is required to bring channel resistance and the October high (1933.28) into focus.

Alternatively, breaching the 200-DMA could ignite a more extensive correction towards key support at the 50% Fibonacci (1763.27).

Silver Prices Weekly Chart – Bull Pennant Hints at Topside Push

Silver prices weekly chart created using Tradingview

Silver looks poised to move higher despite falling back below the 21-week moving average (24.57), as prices carve out a Bull Pennant formation.

With the RSI continuing to hold above its respective neutral midpoint, the path of least resistance seems skewed higher.

A weekly close back above 25.00 is likely needed to validate the bullish continuation pattern and generate a push to retest the yearly high (29.86).

Conversely, a weekly close below the 38.2% Fibonacci (22.90) may precipitate further losses and generate a downside push towards psychological support at 20.00.

Silver Prices Daily Chart – Fibonacci Support Holding Firm

Silver prices daily chart created using Tradingview

Jumping into a daily chart reinforces the bullish tilt seen on higher timeframes, as prices continue to gyrate above the 38.2% Fibonacci (22.90).

Slicing back above the trend-defining 50-DMA (24.28) may propel prices to challenge Bull Pennant resistance, with a daily close above the October high (25.56) needed to bring the yearly high (29.86) into the cross hairs.

On the other hand, a daily close below pennant support and the 22.00 level could result in a pullback towards the 200-DMA (21.74).

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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