Gold volatility fails to subside, silver suffers pullback

Gold Technical analysis, overview, strategies, and levels

Despite the retracement late last week as the US dollar outperformed on Friday, gold prices managed to finish the week significantly higher once again, and once more aid conformist breakout strategies thanks to clearly volatile moves in line with its volatile technical overview. Conformist buy breakouts on the Weekly and both conformist buy and sell breakouts on the Daily late last week yielded the most, though in extreme volatility contrarian reversals also managed to yield provided they were initiated after the level was breached heavily and not rushing into the market opposite.

IG client^* and CoT** sentiment for Gold

Retail traders are buying into these gains with majority buy bias rising in gold. CoT (Commitment of Traders) speculator extreme buy bias has dropped to 79% as while gold long positions rose by 9,529 lots, short positions rose by 7,314 lots and hence in percentage terms has taken it down a notch from the week before’s report. The overall heavy to extreme buy bias held by both retail and CoT traders indicates they are and have been major beneficiaries of recent moves, given they were holding majority buy bias prior to the surge as seen in the chart below.

Gold chart with retail and institutional sentiment

Silver Technical analysis, overview, strategies, and levels

As good a week as it may have been for gold, it was an even better one for silver, with double-digit percentage gains and outperformed against not just gold, but platinum and palladium as well. The closely watched gold/silver ratio plummeted from around 81 at the start of the week to finish near 72, and briefly dipped into the 69 handle. From a technical standpoint, all its key indicators continue to flash green on both the Daily and Weekly charts, its price above all its main short and long-term moving averages, a positive DMI (Directional Movement Index), and combined with a trending ADX (Average Directional Movement Index).

More so than gold, the overview is volatile and has resulted in easy breaches and breaks of its key levels, aiding conformist strategies and testing those trading opposite significant market movement. Those looking to challenge the current overview anticipating market movement to remain more rangebound can consider contrarian reversal strategies, only initiating after the level breaks significantly to avoid getting stopped out more easily.

IG client^* and CoT** sentiment for Silver

As for sentiment, while both retail and CoT speculators have been big beneficiaries of recent moves, the former is the one holding an extreme buy bias starting the week at an 84% long figure. CoT traders are majority long and rising, up a notch at 62% on an increase in longs by 1,097 lots and a simultaneous drop in shorts by 1,484 lots. That contrasts with gold, platinum, and palladium short positions which rose last week, and as a result the heavy to extreme buy bias in the three dropped slightly.

Silver chart with retail and institutional sentiment

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of today morning 8am for the outer circle. Inner circle is from the previous trading day.

**CoT sentiment taken from the CFTC’s Commitment of Traders report, outer circle is latest report released on Friday with the positions as of last Tuesday, inner circle from the report prior.

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