Recent gains at risk as price action hints at further decline

Recent gains at risk as price action hints at further decline
Recent gains at risk as price action hints at further decline

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Most read: Gold remains vulnerable below the key $1800 level and the 200-day MA

GOLD AND SILVER WEEKLY REVIEW

Gold started the week in good spirits before finding resistance at the $1786 level just below the August highs sitting above the $1800 handle. The precious metal has since entered a phase of consolidation as hawkish rhetoric from Federal Reserve policymakers and caution around the US dollar has limited any meaningful movement in either direction. The struggles of the dollar index have kept any significant retracement at bay for now with continued upside amid a host of technical and fundamental headwinds. Silver is facing similar challenges likely to end the week in the red after an impressive two-week rally. The movements of gold and silver will likely be dictated by the dollar index as well as general market sentiment o.

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XAU/USD TECHNICAL PERSPECTIVES

XAU/USD Table D

Source: TradingView, prepared by Zain Vawda

Looking at the big picture, gold’s general downtrend for 2022 has been broken while a major resistance zone around the $1730 level (September and October highs) where price previously printed a double top pattern was also erased. The weekly looks on track for a shooting star candlestick close suggesting further declines in the week ahead.

On the daily chart above, the 200-day MA lines up with the $1800 level which has yet to be tested. Gold has been trading below the 200-day MA since June, which should be a significant test for the bulls should the precious metal break higher during the week. As mentioned earlier, any significant movement is likely to be impacted by the dollar index. If the new week starts with the dollar retreating, there is a good chance that the price will approach the $1800 level before finding resistance with the 200-day MA.

XAU/USD Four hour chart

Source: TradingView, prepared by Zain Vawda

The 4H chart provides further evidence of the nature of the range over the week. The weekly low around $1753 served as important support during the week, keeping the uptrend alive for now. A close 4H candle below this level will be the first sign of a change in structure as gold has printed a new low. This breakout could open a retest of the aforementioned $1730 level (September and October highs).

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Analysis of the period

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XAG/USD Technical outlook

XAG/USD Weekly chart

Automatically generated chart description

Source: TradingView, prepared by Zain Vawda

From a technical standpoint, Silver saw a rejection of the 50-day MA for the second week in a row as the price is currently testing the 200-day MA. The pair remains on course for a bearish weekly close which could lead to further declines to start the new week. Price action remains bullish on the weekly, with the pair posting higher highs and lowers since rebounding from its year-to-date low at the end of August.

XAG/USD Four hour chart

Automatically generated chart description

Source: TradingView, prepared by Zain Vawda

The daily and four-hour timeframes have already seen a move towards bearish price action, with the four-hours in particular posting a series of lower highs and lower lows, as evidenced above. If this continues and silver follows suit daily, there could be a deep retracement towards the psychological level of $20.00 which lines up with the 200-day MA.

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda

. gains risk price action hints decline

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