$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
The daily chart showed there were multiple negative divergences piling up on all indicators at resistance around $2700.
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.
US Dollar Index (DXY) Impact on Gold Prices
The DXY was positively divergent across all indicators on the daily chart—and climbing.
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…
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
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.
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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