Gold, trading at a critical level
Gold futures remained mixed for the week as the previous metal gave up the gains from the previous week to reverse its short term trend after failing to break above the $1230 handle. However, this week’s price action falls in line with our analysis noted from the previous week. The decline down to 1203 through 1197 level is an important price level to watch out for.
Technically, this dip forms a retest of the inverted head and shoulders pattern that we noticed few weeks ago. Although price managed to rally upon break of the neckline, failure to reach its target objective of $1315 does pose some questions as to whether this makes for a failed or a weak inverted head and shoulders pattern.
In this aspect, the current test of the support level near 1203 and 1197 could be critical as a failure of this support could put Gold back to bearish territory.
In the above daily chart for Gold we plot a price channel to identify the price action. Currently we notice price attempting to break out from this channel, but considering the major support below, we expect a possible rally to the upside before Gold could possibly fall further.
In this aspect keep a look out for price near 1231 followed by the major resistance/support level at 1250 – 1240 levels. Failure to break above this level would be an early indication of a failed inverted head and shoulders pattern. We could expect to see a further decline down to 1140 levels, where the next support sits.
From the monthly charts last month price managed to rally to retest the broken trend line and should see a bearish close this month with a close below 1198, it would indicate a potential downtrend being resumed in Gold.
Silver Futures look to follow Gold’s trend
In the Silver charts, we notice an almost similar theme to Gold being played out. However a close back inside the falling price channel is required in order to confirm the bearish trend. To the downside, the target to 14.59 looks imminent within the next few months for Silver.
When looking to the Daily charts in Silver, we notice some elements that are hard to ignore. Firstly, late last week we notice a doji formation on the top followed by a sharp bearish candlestick.
The three candlesticks in tandem would form an evening star, which is a very bearish reversal candlestick pattern. We also notice that price was consolidating into a triangle pattern whose downside targets come towards 14.96, almost close to the downside projections from the monthly charts. This view gives us strong conviction to believe that Silver would most likely overtake Gold futures as far as achieving its downside objective is concerned.
