Yesterday, gold broke back below $4,000 for the first time in close to three weeks. The selling continued this morning in a move which saw gold drop below $3,900 as European markets opened. It has recovered a touch since then, but still looks vulnerable to further selling. It has been a feature of this correction so far that, except for a brief pause last Thursday, the selloff has been relentless.
At no point has there been a significant bounce. But that shows just how overbought the gold market became, with its daily MACD up at extreme levels as it hit an all-time high of $4,380. Gold is no longer overbought. But the daily MACD continues to point down, indicating that momentum is to the downside.
Despite this, gold will find support at some stage, and it’s quite likely that there will be a sharp reversal when it does. But as things stand, it’s difficult to identify any significant support levels as the market shakes off the bullish froth. Once again, the question is whether there is another record-breaking rally left in this market, or if gold has topped someway short of the $5,000 that so many analysts were looking for.
Yet again, it’s a similar story for silver. Just under a fortnight ago, silver hit an all-time high of $56.40. Since then, it has experienced a relentless selloff, dropping to a monthly low of $45.55 at the European open this morning. That represented a high-to-low slump of 19%, so not far short of hitting ‘bear market territory’, defined as a 20% fall from recent highs.
As with gold, silver’s daily MACD has pulled back from severely overbought levels. It too is pointing south, indicating that momentum is still to the downside. But the MACD is rapidly approaching ‘neutral’ levels, and the selloff is looking very overstretched.
Source: TN Trader
Again, it’s difficult to identify significant support levels, but traders should be prepared for a sharp reversal once the selling exhausts itself. Silver took a long time to catch up with gold in terms of making new highs. And it could be that there are still a few rounds to go before the silver rally is finally over.
