Gold and Silver Continue to Hold Key Support Levels
Gold and Silver Continue to Hold Key Support Levels
It’s good news for range traders and dip buyers, and there’s a lot for bears to like
- Precious metals have stabilized after an early-June sell-off sparked by news of China’s central bank ceasing its gold purchases.
- However, gold prices (/GCQ4) have held support in a near three-month range.
- Silver prices (/SIU4) continue to find support around their one-month moving average (daily 21-EMA), as has been the case since late-February.
Market update: Gold prices unchanged month-to-date
An early-month sell-off sparked by news that China’s central bank had halted its 18-month gold buying spree led to aggressively bearish price action in precious metals … for a few days at most. Since the second week of June, both gold (/GCQ4) and silver prices (/SIU4) have maintained multi-month range support, perhaps buffed by shifting perception around the Federal Reserve’s rate cut cycle.
Despite all the noise, there have been few signals for precious metals. Technically, nothing has changed. For range traders and dip buyers, this may be good news; for bears, there’s still a lot to like. Active investors should be patient and willing to adjust their perspective depending upon what levels are achieved in the near-term.
/GC Gold Price Technical Analysis: Daily Chart (September 2023 to June 2024)
Not much has changed for gold prices (/GCQ4) since our update in early June. The range in place since early April, with support near 2300, has continued to hold. As noted at the time, “a consolidation following an uptrend is typically a continuation pattern, which warrants attempts to buy at range support. Given the volatility profile (IVR: 65), selling a tight OTM put spread (short 2300 p + long 2275 p) may be prudent so long as 2300 holds on a closing basis.”
This remains the case (although IVR is now 58). A further advance toward the middle of the range would make directionally neutral strategies like an iron condor or short strangle increasingly valid.
It likewise remains the case that a double top is forming. The measured move still calls for a downside target of 2130 for /GCQ4, but the uptrend from the October 2023 and February 2024 lows would put initial support closer to 2200 initially.
/SI Silver Price Technical Analysis: Daily Chart (July 2023 to June 2024)
In early-June it was noted that “over the past several months, silver prices (/SIN4) have showcased a reliable pattern: breakout higher, then quickly retrace to the daily 21-/34-EMA cloud. This happened in late-February; at the end of April; and now, at the start of June. As the saying goes, “the trend is your friend,” and until the trend of buying into the daily 21-EMA (one-month moving average) fails, there’s no reason to fix what’s not broken.” The trend remains bulls’ friend, as /SIU4 (and /SIN4 before it) has bounced from near 29 and the one-month moving average once more. It thus remains, “a drop below 29 invalidates the breakout as well as the uptrend from the February and May swing lows, setting up a return toward 26.75.”
Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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