This is an excerpt from the Q4-2023 gold and silver outlook. For a detailed discussion on the fundamental outlook on precious metals download DailyFX's fourth quarter trading guide. It's free!
Gold: Needs to clear 1987 for the short-term bearish outlook to change
On technical charts, gold appears to have settled in a triangle formation in recent weeks. The upper edge of the triangle is a downtrend line from July, while the lower edge of the pattern is a horizontal trendline since June. One reason for the stalled price action is because the yellow metal is flirting with the 200-day moving average. Given the relevance of the long-term moving average, the recent indecision isnβt surprising.
XAU/USD Monthly Chart
Chart Created Using TradingView
Unless XAU/USD is able to break above the July high of 1987, the immediate downside risks are unlikely to fade. On the downside, any break below 1885-1890 would raise the odds of a termination of the uptrend that began in 2022. Such a break could clear the way toward the 200-week moving average (now at about 1810).
XAU/USD Weekly Chart
Chart Created Using TradingView
Importantly, it would raise the odds that the spectacular multi-month rally was corrective and not the start of a new uptrend β a point highlighted in recent months. See βGold Could Find It Tough to Crack $2000β,published March 28, and βGold Weekly Forecast: Is it Time to Turn Cautious on XAU/USD?β published April 16.
Silver: Key ceiling is at $26.00-$27.00
The rally in the past one year or so has been substantial, but two developments suggest the rally is no more than corrective (correction of the 2021-2022 slide). Firstly, XAG/USD remains well under stiff resistance on a declining trendline since 2020, reinforcing the downtrend. Secondly, the failure, at least so far, to clear the March 2022 peak of 27.00 - the inability to create a higher high reaffirms the lower-high-lower-low structure since 2021.
XAG/USD Weekly Chart
Chart Created Using TradingView
Any break below immediate support on a horizontal trendline at about 22.00 would trigger a bearish triangle with a potential price objective toward the October low of 19.80. Any break below 19.80 would suggest that the rally since 2022 has reversed. Subsequent support is at the 2022 low of 17.50.
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