Daily Forex Commodities: Gold and Silver

There as a risk of a larger decline beneath $1530.

Gold remains bearish after its dramatic 20% price fall, which helped confirm the extreme overbought conditions (marked by DeMark™ indicators). This also timed a key cycle peak, ahead of that all-important $2000 glass-ceiling.

Most concerning is that speculative (net long) flows have recently breached a key downside level which may threaten over 2 years of sizeable long gold positions.

In price terms, Gold’s latest 20% bearish slide is still worth less than the largest average drawdown measured since the start of the yellow metal’s long-term bull market in 1999.

There is heightened risk of a much larger decline if we confirm a weekly close beneath $1600 and $1554-30 (200-day MA/swing low), which has not been breached in 3 years!

A number of “bargain hunting” trend-followers will be watching this benchmark “line in the sand” for repeat support or a potential big squeeze lower into $1300 and perhaps even $1040-1000. Remember, this would still offer a unique buying opportunity in the near future.

SILVER

Silver has a key support at $26.0700.

Silver’s latest price capitulation is a painful reminder to the investment community that lightning can strike twice. Note, this marks the second time silver has crashed, following its 30% fall last April.

The move was triggered following a DeMark™ exhaustion sell signal and has now wiped out almost 50% of silver’s prior gains (taken from Silver’s alltime high at 49.7900) which was last seen in 1980.

Such a dramatic move traditionally produces volatile trading ranges. This allows the market to have enough time to recover and accumulate renewed buying interest.

Expect a large trading range to hold between $37.0000-26.0700 over the multi-week/month horizon, with downside macro risk into $21.5165 (61.8% Fib-1999 bull market) and $20.0000. This would still maintain silver’s longterm uptrend and help offer a potential buying opportunity for the eventual resumption higher.