Let’s forget about Yellen, the Fed and other headlines for today. Well, let’s at least try as much as possible to do that, and let’s take a look at technical signals for trading gold and silver – in the short-term.
Gold has taken a beating in the last few days. The constant statements about a June rate hike (there we are talking about monetary policies again) sent gold diving, and silver has also corrected from its recent highs.
In fundamental terms that makes sense, since gold and silver tend to trade mostly (but not exclusively) in correlation with the USD. A high USD tends to equal low gold and silver values.
Trading Gold and Silver on Technical Signals
Still, that is not always the case. Plus, be as it may from a fundamental point of view, at Ridge Capital Markets we are looking at the technical signs today and how they suggest traders can play the gold and silver markets in the short-term:
- The SPDR Gold Shares (NYSE:GLD) looks quite ugly. It broke its support levels in the 123-124 range to the downside, taking the SMA20 and SMA50 down along with it. Still, its SMA200 still points towards a higher direction, and a key support level would be the 115.
- The iShares Silver (NYSE:SLV) doesn’t look stunning, but its chart is far more seducing than that of the GLD. If it doesn’t break below the SMA50, staying above 15.50, it looks more immediately promising.
- Still, a chart that we really like in this industry is Anglogold Ashanti (NYSE:AU)’s. While this South African gold miner’s stock has recently broken below the SMA50 and SMA20, it’s currently sitting on a key technical support level of 13.80 – which, if it is held and if the stock rebounds from it, could be heading towards 17.80. And that’s a profitable upside that we believe makes sense for traders to bet on for a good ROI – as long as that support holds and that rebound happens.
Still, if we think about it, Janet Yellen’s words of today will very likely dictate what will happen with AU’s chart, as well as with the GLD and SLV. Hawkish words would probably break support levels, whereas dovish words would probably boost rebounds.
So, in a market which is dominated by central banks, once again we conclude that we can no longer take a look at technical patterns alone without at least paying attention to what may come from the central bank arena.
Still, at the end of the day, the AU stock is looking like a technical buy signal, if it confirms the criteria that we mentioned to bet on it.
And, ultimately, its performance has more to do with the company’s fundamentals, with the bets of value investors, and with technical traders leading it to form clear patterns, than to any central banker’s words. So trade accordingly.