Gold and silver prices may Be topping; Copper support holds for now

Gold tests head and shoulders pattern while silver drops from 40% YTD gains

• Precious metals have struggled over the past few weeks as sustained strength in the U.S. Dollar has become too difficult to ignore. 
• Gold prices (/GCG5) may be in a head and shoulders pattern, or a symmetrical triangle; the setup in silver prices (/SIH5) is similar. 
• Copper prices (/HGH5) are holding support as the improvement in Chinese economic data has been offset by concerns around recent Trump tariff announcements. 
  

Market Update: Gold prices down -0.22% month-to-date 

Metals have been hit hard in the weeks following the U.S. Presidential Election, as a drop in geopolitical risk, higher global bond yields, and a stronger U.S. Dollar has sapped desire to hold shiny rocks. Outside of isolated bouts of headline risk, metals have faced difficulty sustaining any bullish momentum. 

For precious metals like gold and silver, this has translated into a reversal of gains accumulated in September and October; gold is in the middle of a six-month range, while silver is back in the middle of a three-month range. For base metals like copper, the prospect of fresh tariffs from the incoming Trump administration against the backdrop of an already-lackluster Chinese economy has proved damaging unto itself. Net-net, the environment has produced a lot of downward, choppy trading in the metals.

/GC Gold Price Technical Analysis: Daily Chart (June to December 2024) 

Gold prices (/GCG5) may be funneling into one of two different patterns: a bearish head and shoulders; or a bullish symmetrical triangle. What occurs from here is yet to be determined, and the middle of the three-month trading range that leaves open the possibility to significant directional moves (topping; or continuing to new all-time highs). Declining volatility over the past few weeks has come alongside a drop in /GCG5, suggesting a weaker undercurrent that may favor further losses still. Directionally neutral positions (e.g. short iron condor) with short strikes situated on the other side of the October high near 2830 and the November low near 2565 may prove prudent until resolution is found with respect to the head and shoulders or symmetrical triangle. 

/SI Silver Price Technical Analysis: Daily Chart (June to December 2024) 

Silver prices (/SIH5) have seen their >+40% year-to-date gains get chopped down to around +30% YTD gains in the span of five weeks, and in turn /SIH5 has returned to the midpoint of a six-month trading range. Unlike its golden counterpart, which still has a fair amount of volatility, /SIH5 is has seen volatility fall off a cliff in recent weeks (IVR has dropped from near 100 to below 30), which likewise has been a poor indicator for bulls. 

And while a head and shoulders pattern is likewise seen in /SIH5 as it is in /GCG5, the fact is that it is not in play until the neckline breaks. Until then, /SIH5 is holding support, and with today’s price action, is beginning to produce a break of its bearish momentum profile. 

/SIH5 is back above its daily 5-, 21-, and 34-EMAs, but the EMA cloud remains in bearish sequential order. Slow Stochastics have risen from oversold condition, but MACD is trending higher while below its signal line. The technical picture is muddled at best, and the lack of volatility leaves much to be desired. 

/HG Copper Price Technical Analysis: Daily Chart (June to December 2024) 

Copper prices (/HGH5) have traded higher in recent days, returning to the topside of a three-week range and to its daily 21-EMA (one-month moving average). It’s possible that a double bottom is forming, which in context of price action over the past six months, the area around 4.00/10 is meaningful support. Volatility has jumped in recent sessions (IVR: 94.2), yielding an appealing opportunity for traders to examine opportunities with short put spreads, aiming for expirations in January or February 2025. 

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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