Gold shrugs of a stronger dollar to post an impressive recovery, but it is silver’s rally that will have grabbed technical analysts attention.
Gold
Down, but not out, best describes gold’s price action on Friday. Having sold off to a low at 1260.00, gold staged a remarkable 18 dollar comeback to close at 1278.00 as news emerged that North Korea may be about to test a new missile capable of reaching the United States. The rally has continued this morning with gold moving to 1284.50 as China returns from holiday. Iranian sabre rattling, Trump remarks on North Korea and further details of the proposed missile test have injected a geopolitical risk premium back into the yellow metal.
Admittedly gold was approaching a technically oversold condition in the short term anyway. The key now will be if the rally can maintain its longevity once the dust settles and in the face of higher U.S. yields and a stronger U.S. dollar.
From present levels, gold has resistance at 1291.00 and 1296.00. On the downside, the 100-day moving average at 1273.501 should provide initial; support ahead of Friday’s lows at 1260.00. We expect that gold will trade with a bid tone in Asia today but will be vulnerable to headline created movements ahead of this week's data highlight, the U.S. FOMC minutes.
Silver
Silver ‘s technical picture is altogether more favorable to gold. Silver held around its Fibonacci 50% retracement level at 16.5750 for the past week; silver collapsed to 16.3350. It was the price action from there that was particularly interesting though. Racing higher to 18.6600 and in the process creating a bullish outside reversal day.
Silver has followed gold higher this morning and is now trading at 16.9540, just above its 100-day moving average at 16.9043 which capped its gains all of the last week. A close at these levels implies that silver has made a serious attempt to base in its longer-term 38.2/50.0% Fibonacci retracement box.
The next resistance is at the 17.0000 region which silver almost reached this morning, followed by the 200-day moving average at 17.1650. Support rests at 16.7900 and the now distant Friday low at 16.3350.
Silver’s price action is particularly constructive given the general strength of the U.S. dollar and its lower beta to geopolitical noise then gold. Time will tell as to whether this reflected its more oversold condition, or whether it is a general signal that the worst may be over for the precious metal correction.