For Gold and Silver bulls, yesterday’s price action brought some much-needed relief to the recent relentless trend lower, with both metals moving higher in the session.
For gold, the intraday low of $1226.30 tested the strong platform of support at this level, which duly held, as the precious metal recovered to close at $1235.10 with a relatively wide-spread up candle on average volume. Not a change in trend, but welcome nevertheless! In overnight trading this mildly bullish tone has continued with gold trading at $1237.30 on Globex for the December futures contract at time of writing. Any future progress higher for gold, as with other commodities, will be heavily influenced by the FOMC and the two-day meeting which gets underway later today.
All eyes are on the tone of any statements from Janet Yellen. With markets expecting the hawkish tone to develop further, and with the US dollar poised to break higher, the current recovery for gold is likely to be short-lived, nothing more than a minor rally which we have seen many times before. Whilst the buying season in India may provide some relief, the longer term outlook for gold remains heavily bearish, and last week’s five consecutive down days on high volume, was evidence enough, if any more were needed.
The key level is now the support which held firm yesterday in the $1228 per ounce region, but if this is breached, gold is likely to continue lower once again, reflecting the negative sentiment for commodities in general on the CRB Index, which too has ticked lower again this morning, down 0.06 at 281.84.
Moving to the December futures contract for silver, yesterday’s recovery was muted, with the metal closing with a small doji candle on very low volume. The pause point of yesterday, and the minor move higher overnight, simply reflect the limited buying which appeared on Friday, as evidenced by the small lower wick to the candle body.
For silver bulls as with gold bulls, the longer term outlook remains heavily bearish, and with the depth of resistance now overhead in the $19.40 per ounce area, this is adding yet more downward pressure. As I have pointed out in previous posts, if the $18.50 per ounce level is breached, then expect to see silver move deeper still and down toward $13.80 per ounce in the longer term.
What is perhaps more interesting for silver, is that despite the continued bullish momentum for stocks, the industrial metal continues to decline. Like copper, the relationship to stocks appears to be one that has fallen out of correlation. Whatever the reason, the sentiment for both silver and gold remains very bearish.
Until we see a buying climax, accompanied by an extended phase of price consolidation and congestion, there are not yet signs of any reversal in the short-term for either metal.