Silver Lining On Gold
Daryl Guppy | Mar 27, 2019 13:29
Originally published by guppytraders.com
Lurking in the market are a number of well correlated commodity and currency pairs. Sometimes they are pairs that move in lockstep with each other. Other pairs move opposite to each other. Steady and reliable trading strategies are built around these steady relationships.
Gold and silver are one such pair. They almost move in lockstep like a pair of ballroom dance partners but usually with gold in the lead by a few days. A successful trading strategy is to look at gold but trade silver for the same move and with higher leverage.
In more recent times this dancing pair appears to have undergone a divorce. The trend behaviour in the two metals has diverged considerably. In broad terms, gold reacted away from resistance near $1350 in April 2018. The retreat tested the support level near $1210 around September 2018 before a new rally took gold back to a high near $1350 in March.
Gold shows a weak uptrend with limited strength to mount a successful breakout above the long-term resistance level $1350.
Silver has moved very differently and continues a secular downtrend that started in July 2016. In broad terms, silver broke through support near $15.80 in July 2018. It moved quickly to the next support level near $14.15 around November 2918 and then had a good rally back to around $15.80 in early 2019.
Unlike gold, silver has a more bullish aspect even though some of the weekly price behaviour resembles that of gold. Its bullish because silver has already broken above the resistance level and this retreat is part of a consolidation pattern. Its bullish because the long-term Guppy Multiple Moving Average (GMMA) has stopped falling and is beginning to flatten out and turn upwards. The short term GMMA is testing the lower edge of the long term GMMA as a support level. All of this activity takes place near the resistance level which suggests a consolidation prior to a breakout.
Gold shows a strong pullback from a strong resistance level. Long term GMMA support is weak.
We can no longer trade silver as a proxy for gold. Silver by itself, offers a more bullish opportunity with an upside target near $16.80.
Axicorp . Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.