Gold and silver in sideways correction of longer-term uptrend

Spot Gold ($)

The long-term trend for gold remains up, as gauged by the price trading firmly above the 200 day (blue line) simple moving average (MA).

In the short to medium term however, the price has been whipsawing through the 20MA (red line) and 50MA (green line), suggestive of the short to medium trend being one of consolidation or sideways movement. The sideways consolidation is highlighted with the shaded rectangle on the chart with 1660 considered the key support level of this consolidation, while the 1765 level is considered the resistance of this consolidation.

In lieu of the long-term trend being up for gold, traders of the commodity might consider keeping a long bias to trades on the precious yellow metal. Range traders might look for a bullish price reversal before the 1660 support level (for long entry), targeting a move back towards the 1765 resistance level. Alternatively, breakout traders might prefer waiting for a break (close) above the 1765 level for long entry targeting a move towards the historical high at 1885.

Spot Silver (5000/oz)

Gold and Silver are considered to have a high degree of correlation. In turn the picture and guidance for spot silver is similar to that of gold.

The long-term trend for silver remains up, as gauged by the price trading firmly above the 200 day (blue line) simple moving average (MA).

In the short term however, the price has been whipsawing through the 20MA (red line) suggestive of the short-term trend being one of consolidation or sideways movement. The sideways consolidation is highlighted with the shaded rectangle on the chart with 1670 considered the key support level of this consolidation, while the 1840 level is considered the resistance of this consolidation.

In lieu of the long-term trend being up for silver, traders of the commodity might consider keeping a long bias to trades on the metal. Range traders might look for a bullish price reversal before the 1670 support level (for long entry), targeting a move back towards the 1840 resistance level. Alternatively breakout traders might prefer waiting for a break (close) above the 1840 level for long entry aand suggestion that the long term uptrend is resuming.

Gold vs Silver

The candlestick chart above is that of spot gold, while the blue line indicator is a ratio of gold (numerator) over silver (denominator). The labelled dotted lines form a standard deviation channel with a mean over the gold/silver ratio. The ratio currently trades around the mean. This suggests that at gold and silver currently trade at fair value in relation to each other. Should the ratio line move towards the -2 standard deviation point, this might be a suggestion that gold is oversold relative to silver. In this situation traders might consider taking a long trade on gold paired with a short trade on silver expecting the ratio to return to the mean. Should the ratio line move towards the +2 standard deviation point, this might be a suggestion that gold is overbought relative to silver. In this situation traders might consider taking a short trade on gold paired with a long trade on silver expecting the ratio to return to the mean. For now, however, we see no arbitrage opportunity between the two metals.