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Gold & Silver Pause: Analyzing Market Trends

Two professionals analyzing market trends with a focus on stock charts and financial reports

$2700 in Gold was always going to be resistance. Gold rose briefly above that resistance on Sept. 26, then fell to around $2650. Then it bounced back to $2690 on Tuesday, Oct. 1. That evening, I warned that Gold was likely to turn down again and that Silver and miners would follow. Why?

 

Gold Market Trends and Technical Analysis

Gold Price

The daily chart showed there were multiple negative divergences piling up on all indicators at resistance around $2700.

gold price

The weekly RSI and the MACD Histogram in blue were also negatively divergent at resistance.
The weekly MACD Line was at its highest level since the 2011 peak! We know what happened after that.
Sentiment was extremely bullish and negatively divergent, which is bearish.
The Banks were “record” short.

gold price

 

US Dollar Index (DXY) Impact on Gold Prices

The DXY was positively divergent across all indicators on the daily chart—and climbing.

gold price
DXY’s weekly RSI was positively divergent, as was the MACD Histogram.
The weekly MACD Line had bottomed out and was turning up also.
Since then, this is what the DXY has done…

gold price

And this is what has happened in Gold:

And this is what has happened in Gold:

 

Potential Gold Price Correction: Key Levels to Watch

It looks like a typical ABC correction down to $2630 or $2600. It’s too early to determine if that is the case, but it appears to be the most likely outcome at this time.

 

Silver Price Analysis: Critical Resistance and Support Levels

And this is what has happened in Gold:

We can see a similar ABC structure in Silver, which ran into a brick wall at $32.60. A break and close above there would signal we’re off to even higher highs. Until that happens, the risk is down to $30, the low on Sept. 18. A break of support at $31.15 ahead of that would certainly warrant a test of $30.
A break and close below $30 would be the worst-case scenario. Followed by a break below $29.50, this would signal a much deeper dive to $27-$24, IMHO.

And this is what has happened in Gold:

 

Silver Price Forecast: Short-Term Outlook

At this time, I believe this is a low probability. As long as the support zone between $30-$29.50 holds, I expect Silver to just trade sideways to work off the overbought conditions and extreme bullishness, then turn up again to new highs. The same goes for Gold unless $2600 is broken to the downside.

 

Conclusion: What’s Next for Gold and Silver?

The metals had become overbought and extremely bullish and were due a breather, aided by a resurgence in the DXY. However, the overall trend remains firmly up. Only a break and close below $2600 in Gold and $30-$29.50 in Silver would signal a deeper dive.


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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.