However, gold was the second best performing of the major asset classes last year, and we argue that in the short to medium term the price is currently in a sideways rather than down. For commitment to a longer-term downtrend we would prefer to see the price confirmation with a break of key support of the range highlighted below.
The short- to medium-term range for the price of gold is considered between levels 1775 (support) and 1960 (resistance). Circled blue, we see the price reversal near support of the aforementioned range. The price reversal is supported by a move out of oversold territory. The indicator is also showing a hidden divergence signal with the price (red lines).
These are bullish signals in technical analysis terms and favour a rebound with resistance at 1870 the initial target. Traders who find long entry might consider using a close below range support at 1775 as a stop-loss consideration.
Should the price instead move to close below the 1775 support level this would consider failure of the range trade and a downside breakout, adding credence to the longer-term bearish signal inferred by the ‘death cross’.
The price of silver remains in a longer-term uptrend as the 50-day SMA continues to trade firmly above the 200-day SMA. In the medium term, however, we see that the price is currently within a broad range – between the 2175 (support) and 2980 (resistance) levels.
We have recently seen a reversal off resistance of the aforementioned range, and traders looking for long positions might prefer to see further weakness playing out before finding entry.
The below candlestick price graph is that of gold. The indicator (blue line) on the chart shows a ratio of gold (numerator) relative to silver (denominator).
The ratio has a mean (moving average) added (dotted red line) with two standard deviation line above and below this mean. The green arrows show how on a short term basis, when the ratio moves below the lower deviation line it has often reverted back to and sometime past the mean.
This content was originally published here.
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