Technical Outlook: Gold and Silver
Recently announced downward revision of global growth forecast by IMF together with the US Dollar weakness, on the back of FOMC minutes’ announcement, provided strong support to the precious metal prices that were declining heavily. Gold prices rallied more than 2.5% during the current week while Silver prices are on the way to secure its first positive weekly close by registering 3% gain.
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Inability to break important support level coupled with the fundamental backing and the RSI reversal helped gold prices to trigger a rally towards the break of descending trend channel. However, 76.4% Fibonacci Retracement of its December – 2013 to March – 2014 up-move, near $1233, is restricting the yellow metal’s upward journey towards $1240 and the $1257 – $1260 resistance zone, encompassing 50-day SMA and 61.8% Fibo. level. On the successful encounter of $1260, the gold prices become vulnerable to head towards $1295 level with $1275 being intermediate resistance level. On the downside, a break of $1215 negates the trend channel breakout and the bullion again becomes vulnerable to test $1200 and $1182 – $1180 support zone. Should it extends the downturn below $1182, the $1150 level becomes a quick support for the gold prices before testing $1130.
Even after registering higher gains than the Gold prices, Silver prices continue observing the descending trend channel and reversed from the channel resistance, near $17.75, on yesterday. From the current level, $17.00 becomes immediate support for the white metal prices, breaking which $16.70 and the channel support line of $16.35 can limit the white metal’s downturn before plunging to horizontal support line of $16.00. A daily close below $16.00 can cause the white metal prices to quickly fall to $14.95. On the upside, a break of trend channel resistance line, $17.60 at present, can cause silver prices to rally till $18.20, encompassing 76.4% Fibo. level of its long up-move connecting October 2010 low to April 2014 high. Moreover, a break of $18.20 can extend the silver prices’ up-move towards 50-day SMA, near $18.70 which becomes medium-term important support turned resistance level.