What is Next for Gold and Silver Markets?

By: Richard_Cox

Over the last year, precious metals markets have have been one of the most closely watched asset classes in the financial environment as price volatility has reached heightened levels on several occasions.  For those looking for evidence that the declines have finished (and that the long-term uptrend has resumed), it will be critical to turn the attention back to the underlying economic data that will determine where sentiment moves in the broader market.  It is always a good idea to keep in mind that gold and silver tend to perform well when the rest of the market looks negative, as investors have historically used precious metals as a way of gaining safe haven exposure and to safeguard against potential rises in inflation.

For this reason, economic data in the upcoming week will be particularly important in gauging the overall strength or weakness in the global economy.  “Positive surprises in areas like employment and industrial production could put additional pressure on gold and support the global stock benchmarks,” said Tony Davis, metals analyst at Atlanta Gold & Coin.  “If these next reports come in weaker than expected, we will likely see some renewed rallying in precious metals.”

Since the upcoming data releases are likely to generated price movements in the precious metals space, we will next take a look at some of the most critical support and resistance levels in both the SPDR Gold Trust ETF (NYSE: GLD) and iShares Silver Trust ETF (NYSE: SLV), which are the most commonly traded ETFs in the precious metals space.  In the following section, we will assess the latest technical developments in the gold and silver daily charts.

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SPDR Gold Trust ETF (NYSE: GLD)

Critical Resistance:   125

Critical Support:   110

Trading Stance:  Bullish

GLD / Gold Trading Strategy:  Prices are trading in the middle portion of the long-term range, and the rising MACD indicator reading suggests that trends in the coming weeks will continue to be positive. 

Market valuations in GLD have started to form a broad trading range, with long-term resistance now coming in at 125.  In recent weeks, we have seen some good rallies after hitting support at 110 and we are now coming into new short-term highs near 116.  This is essentially the middle of the long-term range, so there is still scope for prices to extend higher if we start to see worse than expected economic data.  Supporting this outlook is the Daily MACD reading, which is now starting to cross into positive territory.  This suggests that momentum is bullish, and this will make it much easier for prices to rise back toward the top of its long-term range.  A downside break of 110 would reverse this bullish bias.

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iShares Silver Trust ETF (NYSE: SLV)

Critical Resistance:   17.50

Critical Support:   14.80

Trading Stance:  Bullish

SLV / Silver Trading Strategy:  Prices in SLV are holding closer to the lower end of their recent ranges, and this makes the metal a good choice for contrarian buyers.  Major resistance is not seen until 17.50.

The overall price momentum in SLV has not been as strong, but there are now reasons to believe that the potential for a reversal is building.  For the most part, the bearish trends that sent silver to its lows for the year have started to abate, and this opens the way for contrarian traders to start building positions at current levels.  Important support is now seen at 14.80, and the bias remains cautiously bullish as long as prices hold above that zone.  For that do establish long positions should consider setting 17.50 as a profit target, as prices are unlikely to move through there, at least upon first test.  The Daily MACD reading has moved into bullish territory but there is a possibility that we will start to roll over here.  If this occurs, there is some added risk for traders that are long in the silver markets.

By Richard Cox

© 2015 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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