Chart 1. Gold Daily: Former Support Retested, Another Spike Is Possible
Gold has finally reached both the AB/CD target and the former support area of $1237 (gray dashed line) as it was forecasted last month in this chart. The metal hit the maximum of $1243 on the 26th of October and then dropped like a rock as was also anticipated after the completion of a pullback. Last Wednesday the price established a low of $1212 losing $31 (-2.5%) from the top. But at the end of last week, gold restored almost all of its losses, closing just below the former support at $1233.
The situation starts to be interesting as silver lags far behind gold and this could add some uncertainty to the price action. The second leg of silver to the upside could push gold higher, and that’s why I added the Fibonacci retracement levels (blue box) between the $1239 (38.2%) and $1263 (50%). This area has been penetrated already, but the price has now been below it so another try could bring gold inside of the blue box.
Some traders keep a neutral stance after the completion of the structure as pullback reached the goal. I ultra-squeezed the chart for them to cover the larger structure, which consists of two big black down arrows inside of the huge range between $1122 and $1375. This is to remind you about the bigger picture, which was last posted in August in this chart. As soon as the pullback looks normal the retest of $1122 is still valid to complete the entire structure, which was started more than two years ago. This will be invalidated in case gold breaks above $1309 or if the structure of the chart would change (earlier invalidation).
Chart 2. Silver Daily: Second Leg Of Pullback
Silver had a complex and unclear chart structure from the start of the pullback compared to gold, which has a clear chart with a visible target. Another thing is that silver lags heavily behind gold as if it moves like a slow-motion video. This gap creates both uncertainty and opportunity in the market.
I zoomed in the silver chart as the structure, finally, gets clearer and we should focus on an emerging pullback, which is yet to be completed. All four legs are now visible. I highlighted the upside legs with two blue up arrows representing the AB/CD segments. The BC junction in between (orange trendlines) was formed with two counter-trend down moves (two small red down arrows), which almost have equal bottoms around $14.25. The calculated target for the CD segment is located at the bottom of the blue box around $15.23, where the CD=AB and it coincides with the 38.2% Fibonacci retracement level.
Another convergence of significant levels is in the area of $15.61-15.63, where the former support and the 50% retracement are located (blue box top). Let’s see if the white metal could do what yellow one has done already. Anyway, silver has already been a game changer as it could push the gold price higher on the back of its own second leg of a pullback. The invalidation of a pullback is set below the C point ($14.25).
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.