Gold And Silver Price Drop To Critical Fibonacci Levels

The Fed decided to keep the “considerable time” pledge until the first rate hike in its statement on Wednesday. This boosted stocks, sending the Dow and S&P to fresh record highs. The dollar bulls were also satisfied with the so-called “dot plot” of Fed members’ forecasts for interest rates edging higher. As the dollar and stocks continued to strengthen, so too did the pressure on commodities priced in the US currency. And so as another week draws to a close, both gold and silver are once again falling.

The sell-off has forced the metals to break below some key technical support levels. As a result, fresh sell orders have been triggered which have thus exacerbated the sell-off.  In fact, silver has just broken below the 2013 low of $18.20 and at the time of this writing, it looks like more losses are on the way for the grey metal.

For silver, the next potential support is around $17.75/80, a level which corresponds with the 127.2% Fibonacci extension of the last major upswing. The 161.8% extension of that move comes in way down at $16.75. Worryingly for the bulls, the metal has also created a “death crossover” which is another bearish development. This crossover occurs when the 50-day moving average drops below the 200-day SMA.

The bulls will be hoping that the metal may bounce back off its lows and close the day above where it had opened or ideally at an even better level. If that were to happen, it would indicate that there was lack of supply below $18.20 and we would potentially have a false breakdown reversal pattern on the cards. As we go to press, the chances look slim for this scenario, but it is nonetheless a possibility. The RSI meanwhile is also at an extremely oversold level and this also point to a possible bounce. The near-term resistance levels to watch are at $18.20, $18.60, $18.90 and $19.30 – levels that were formerly support.



Meanwhile, gold has been coming under increased pressure too following the break of the key $1240 level and the subsequent rejection of the rally there. As a result, a move down to $1210/12, where a couple of Fibonacci extension levels converge, could be the next stop – potentially ahead of $1180/5 after that. However, a closing break above $1240 would invalidate this bearish outlook.



By Matthew Weller


Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing