Gold, XAU/USD, Silver, XAG/USD – Technical Outlook:

  • Gold is hovering around major 1675-1685 support.
  • Silver has retreated from key resistance.
  • What is the outlook and what are the key levels to watch?

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GOLD SHORT-TERM TECHNICAL OUTLOOK – NEUTRAL

Gold’s inability to extend gains this month and the retreat from stiff resistance is a sign that the yellow metal is not out of the woods. At the same time, the downside appears to be cushioned for now, pointing to a range developing in the near term.

XAU/USD Daily Chart

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Chart Created Using TradingView

XAU/USD has retreated from key converged resistance: the mid-September high of 1735, coinciding with the 89-day moving average and the upper edge of a declining channel from April (see chart). Gold is now holding above support on the midpoint of the channel, potentially forming a 1610-1750 range in the near term.

XAU/USD Weekly Chart

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Chart Created Using TradingView

Still, the overall the bias for gold remains down. On the weekly chart, gold has been flirting with crucial support on a horizontal trendline from 2021 at about 1675-1685, which in a way is unsurprising given the significance of the support – a potential major Double Top formation (the 2020 and 2022 highs). The price objective if the pattern were to trigger would point to substantial weakness in the subsequent weeks and months.

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SILVER SHORT-TERM TECHNICAL OUTLOOK – NEUTRAL

Silver’s failure earlier this month to break above key resistance highlights that the precious metal remains in a range at best for now.

XAG/USD retreated from near tough resistance at the at the August high of 20.85, slightly below resistance on a horizontal trendline from late 2020 at about 21.50. Moreover, momentum on the weekly charts hardly budged despite the sharp intraweek rally in early October. Indeed, the 14-week Relative Strength Index (RSI) has stayed under 50 since the downtrend stalled in July near quite-strong converged support area: the lower edge of a falling channel from 18.13, coinciding with a horizontal trendline from 18.70 (see chart).

XAG/USD Weekly Chart

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Chart Created Using TradingView

Furthermore, the inability of momentum to rise meaningfully is also a sign of a bear market rally. Typically, in such corrective rebounds, the RSI tends to be capped under 50-60 levels.

While the broader downtrend remains intact, the sideway price action in Silver could continue in the short term. XAG/USD needs to break below support at the September low of 17.50 for the downtrend to resume. That could pave way towards 15.50 (the 78.6% retracement of the 2020-2021 rise). On the upside, silver needs to clear resistance at 20.85-21.50 at minimum for the medium-term downward pressure to ease.

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— Written by Manish Jaradi, Strategist for DailyFX.com





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