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Gold & Silver in a LT rally


Mercury

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5 minutes ago, Mercury said:

Potential break lower in Gold and Silver.  It has been a bit whip-lashy of late so I will not be confident until I see key support horizontals broken but it is looking promising for a continuation of that bearish retrace.

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If you look at our Chief Analysts breakdown this morning around 10am he mentioned 'A failure to push on, similar to what we have seen so far this week, would raise the prospect of a turn lower towards $1460.

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https://www.ig.com/uk/news-and-trade-ideas/gold-price-hits-resistance-while-oil-price-pushes-upwards-191218

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God and Silver remain in flux.  I can't trade it here.  Only a breakout of over head resistance is tradable long for me as another large leg down is still very much on the cards.  Plenty of other bett

Nothing much going on with Gold/Silver, the anticipated consolidation period continues.  The competing drivers of USD and Stocks/Bonds movements may be neutralising clear direction for now but in anyc

While Stocks and USD seem to be moving bearishly PMs are, intuitively, going bullish.  However unless we have just seem the definitive bull ending move on stocks (or perhaps despite this if it eventua

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14 minutes ago, dmedin said:

From what I can see on the daily time frame gold is really going nowhere, and IG don't offer the option to buy and hold (the only future is Feb 2020, and I doubt we'll get the eventual breakout before then).  Maybe put some funds in a gold-tracking ETF?

We will offer ETFs that track gold, that doesn't cost us anything to offer but the once we have that are non-leveraged only on the platform are margined at 100% to borrow. Due to the risk of these we don't offer them but I will tell the desk there is interest so they can reconsider. 

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1 hour ago, dmedin said:

From what I can see on the daily time frame gold is really going nowhere,

Certainly in a sideways consolidation phase but these eventually breakout and can do so fast, hence my Short.  If it breaks lower then great if it returns into consolidation then I get stopped out and live to fight another day.  Trading consolidation breakouts is a legitimate strategy.  Trading trends require an established trend, obvs.

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1 minute ago, dmedin said:

Hi @CharlotteIG, do we pay interest on holding a long gold DFB overnight?  I can't remember.  

Hey @dmedin, Spot gold overnight funding is worked out the same way as forex, TomNext rate. With these you can actually see an estimated rate for tonight. Today you can see holding a long position will mean you pay around 0.281 x bet size. 

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You can add this on the platform by adding a FX, spot gold and spot silver watchlist. Then add swap bid and offer on the platform: 

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Looks like Gold/Silver is consolidating in a Triangle pattern.  Price is currently close to the top end of this.  A breakout to the upside could spell the end of the bearish retrace but surely that would require one or both of Stocks to fall and USD to fall?  Recently USD looks set to continue to rotate higher for a while longer so stocks to fall? During the famous Santa rally?  A turn down from the top of the channel could be a decent Short but hard to trade such an elongated sideways move with any conviction.  If you add a Bollinger band you will find that the top of the band coincides with the top of my channel.

XAUUSD-Daily_191219.thumb.png.1c8fdae64570e71e3bf7d9aa2704283e.pngXAGUSD-Daily_191219.thumb.png.22b7c3374566ab2ae89d5f4469b9de39.png

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Looks like Gold/Silver is consolidating in a Triangle pattern.  Price is currently close to the top end of this.  A breakout to the upside could spell the end of the bearish retrace but surely that would require one or both of Stocks to fall and USD to fall?  Recently USD looks set to continue to rotate higher for a while longer so stocks to fall? During the famous Santa rally?  A turn down from the top of the channel could be a decent Short but hard to trade such an elongated sideways move with any conviction.  If you add a Bollinger band you will find that the top of the band coincides with the top of my channel.

XAUUSD-Daily_191219.thumb.png.1c8fdae64570e71e3bf7d9aa2704283e.pngXAGUSD-Daily_191219.thumb.png.22b7c3374566ab2ae89d5f4469b9de39.png

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16 minutes ago, dmedin said:

That's a big divergence between commercials and speculators and that usually results in price swinging the opposite way, right? 

That is one reason I have 2 scenarios, sort of...  However the COT data is only relevant (to me at least) at major turning points, which this isn't.  The big divergences (or net bearish non commercials) occurred in late 2015 and Autumn 2018, which produced large rallies.  Extreme bullishness of the non commercials at the recent top and turn at 1555 was an indicator of exhaustion.  However once we are in a long term trend, which I believe we are in, then the COT data is largely irrelevant and there is no telling how exuberant the rally may be.  So for me COT is not a factor in deciding whether the market will rally or fall from here, or to be more precise it is not a reason to not go long if price action and other indicators support a rally scenario.  If the bearish scenario does hold then COT may become interesting again to spot the turn back up but not for the resolution of a consolidation phase, if that is what this turns out to be.

 

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16 minutes ago, dmedin said:

That's a big divergence between commercials and speculators and that usually results in price swinging the opposite way, right? 

That is one reason I have 2 scenarios, sort of...  However the COT data is only relevant (to me at least) at major turning points, which this isn't.  The big divergences (or net bearish non commercials) occurred in late 2015 and Autumn 2018, which produced large rallies.  Extreme bullishness of the non commercials at the recent top and turn at 1555 was an indicator of exhaustion.  However once we are in a long term trend, which I believe we are in, then the COT data is largely irrelevant and there is no telling how exuberant the rally may be.  So for me COT is not a factor in deciding whether the market will rally or fall from here, or to be more precise it is not a reason to not go long if price action and other indicators support a rally scenario.  If the bearish scenario does hold then COT may become interesting again to spot the turn back up but not for the resolution of a consolidation phase, if that is what this turns out to be.

 

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On 20/12/2019 at 15:20, dmedin said:

What's going on with silver?

Answer?

On 19/12/2019 at 14:16, Mercury said:

Looks like Gold/Silver is consolidating in a Triangle pattern.  Price is currently close to the top end of this.  A breakout to the upside could spell the end of the bearish retrace

Now it appears that both Gold and Silver are breaking to the upside.  A close above the upper Triangle line would be a strong indicator that a consolidation period has ended (has already done so on Silver).  This will not be conclusive until there is a break above the September high and this would also be a breakout of a long term consolidation Triangle on Silver, which has been lagging Gold significantly in the 2019 rally but that could be about to change...

Both metals have a positive momentum divergence on the recent lows, the one on Silver being strong (and therefore indicative of a stronger move to come, relative to Gold.  Both have completed an A-B-C retrace (complex version, which is also consistent with a consolidation phase prior to another wave in the same direction as the previous one, in this case bullish).  Gold has retraced to only a very shallow level while Silver has dropped to the nearly the Fib 62% (a highly credible retrace turning point) and in addition has turned near the MA200.  Lows and turns occurred with oscillators oversold.  And now we have a potential triangle break out.

We could still see a retest of the Triangle breakout zone so caution is needed but this doesn't always happen so I am long slightly ahead of the breakout with stops below the most recent bottom, below the Triangle lines, on the 1H chart.  I think we would need to see one or both of Stocks and USD going bearish to support this breakout.  EURUSD has been struggling of late but may have found support similarly GBPUSD.  AUDUSD is above its daily chart channel line and seemingly heading up to test recent highs, which is encouraging for USD Bears.  FTSE100 is stalled at the Fib 78% and Dax and Nikkei have not followed US large caps in the recent Santa Clause rally (possible melt up?).  Notably the Russell2000 turned down at the end of Friday trading, which may be nothing or may be an indicator that the rally is losing mojo.  The Vix has gone sideways and actually rallied a bit on Friday while the US large caps were tearing up, a sign of nervousness perhaps?  It seems that all the commentators are talking up 2020 for the US stock market and grinning ear to ear about the performance in 2019 since the large correction last Christmas.  As a contrarian I take these predictions as a sign of over optimistic complacency.  Indeed many sentiment signals are showing this as well but one that curiously isn't is COT data, which shows a net bearish stance on the SP500 with the Nasdaq not far off the same.  Sign that the big boys are worried the rally is unsustainable?

Guess we will fine out soon enough, will it wait until January though?

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The Gold and Silver bugs are justifiable excited just now with a breakout of a potential triangle consolidation (albeit also a 50% retrace on Silver).  We could yet see a bearish phase before a breakout rally above the previous highs, which could retest the Triangle, at least on Gold (much shallower than Silver).  Once it does break above the previous highs though surely the all time highs come into focus and, if some commentators are to be believed, way beyond that.  Gold/Silver at these levels would make this a much better trade that Short stocks in the event of a collapse as there is no barrier to the upside.  I have far more confidence in a Long Gold/Silver trade than Short stocks.  The technicals supported the original breakout, which I wrote on at the time and now a consolidation continuation pattern looks to be a decent bet.  I am Long both from before the Triangle breakout but looking to Silver as a far greater potential ride once the trend direction is settled.

XAUUSD-Daily_281219.thumb.png.7c580e0c9646c69e125525e511928698.pngXAGUSD-Daily_281219.thumb.png.955758239a1a4d2f42daadd49295aaae.png 

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17 hours ago, dmedin said:

Hopefully silver bounces back up and doesn't give up all these gains.  Stupid fat idiot that I am, buying into a top again.

It is common but not always the case that a breakout will put in at least one, sometimes 2 retests of the breakout zone.  This depends on where in the cycle we are.  If at the beginning of a trend change, where markets are composed of more bull bear push me pull you, this results in more retests.  If in a consolidation continuation part of a cycle, within an established trend there will be fewer or no retests as the broad bias is in the direction of the trend.  These actions can take years on some markets, for instance the 2016 breakout on Gold retested the zone twice across several years with the second forming a right hand shoulder of a Head & Shoulders formation (Aug 2018).  After that there was a smaller, faster breakout and retest in Sept 2018 which precipitated a rally phase and then we had a Triangle consolidation that broke out on 31 May 2019 with no retest at all.

This breakout looks similarly strong compared to the 31 May 2019 breakout and also similarly it is a breakout from a Triangle consolidation phase, apparently (needs a higher high to confirm).  The best way to trade these breakouts is to identify them early and trade at an earlier turn in the chart formation (i.e. a turn on the lower support line/zone).  This I call a preemptive trade because the breakout has not yet happened and may take a few attempts.  The second opportunity is the breakout itself and here if you have some confidence you can take a chance on a slightly early entry (i.e. buy on a dip prior to the breakout (or a 1-2 retrace on a 1H or 4H chart), which is what I did once I spotted the Triangle on Gold/Silver).  The third is the breakout itself.  After that you must wait for a dip, which may or may not be a retest of the breakout zone.  You can see this pattern on FX right now, with the breakout and retest completed at the end of last week.

In terms of Gold/Silver we have 3 scenarios from here (other than a total reversal into a longer term bearish retrace, possible but less likely now):

  1. Retest of the breakout area
  2. Small scale 1-2 retrace that does not reach the breakout zone and then rallies higher
  3. The rally carries on fast through the resistance zone formed by the recent high where it may put in a retest of that zone as so we begin the process again.

Any Long now would either need a very close stop, which renders it almost certainly a loser, or a long stop past the breakout zone.  A buy the dip Long could have a credible stop below the bottom of the dip, if you can spot that in real time that is...

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1 hour ago, dmedin said:

Silver seems to be behaving herself, and she has a nice bottom at 1772, come on now my sweet, sail away, sail away - up and beyond! 🥳😻

Unlikely without a stocks wobble IMO.  USD likely to be important for G/S rally but for this to really take off we will need to see either a large increase in inflation or an economic reversal (which would result in a stocks bear) or both.

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1 hour ago, Mercury said:

Unlikely without a stocks wobble IMO.  USD likely to be important for G/S rally but for this to really take off we will need to see either a large increase in inflation or an economic reversal (which would result in a stocks bear) or both.

I've missed the boat twice on gold now, was there any 'fundamental' reason to see a Christmas breakout for G/S when the U.S. indices were still rallying?

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2 hours ago, dmedin said:

I've missed the boat twice on gold now, was there any 'fundamental' reason to see a Christmas breakout for G/S when the U.S. indices were still rallying?

Does there have to be a special fundamentals reason?  Perhaps some gold bugs saw the same USD bear move that I did and decided to front run.  Maybe the same bugs foresaw a stocks decline.  Or more likely the same fundamental story that started the rally at the beginning of the year is simply still holding sway.  This is why I prefer to follow technical signals and trade what I see.

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Never-ending Bulls, no return to "Tory" boom and bust!  Meanwhile back in the real world Gold has just broken out through the resistance offered by the previous high confirming for me that the retrace was a consolidation (possible a pennant form) in a longer term bull phase.  Silver is much further behind but will most likely catch up and overtake in due course.  A breakout with a Gap is the strongest form, still we have to watch out for a short term bearish retrace to close the gap and retest the breakout zone before the next part of this long term rally phase gets going.

Buy the dips on Gold and Silver.  Doesn't augur well for either USD or Stocks IMO and with Oil rallying as projected the pressure on profits will only increase.  Possible commodities reflation trade is on.

Long Gold/Silver; Short USD; Long Oil (I am not but that is the trade); Short stocks if the break lower is confirmed.

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Buy and hold gold at this stage, I would say.  Missed the boat waiting for breakouts far too often.  Personally I'm trading it using pivots but 'analysing' with Fibos :D

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We have a couple analysis and trade idea pieces for Gold today... They seem to be missing silver out, sorry :( 

Article: Brent crude and gold continue to gain

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Trade idea video from Jeremy Naylor

DailyFX piece Gold Prints Highest Price in Over Six Years -Where Maybe XAU/USD Next Stop?

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These pieces are written by our Analysts and DailyFX but are not guiding you to trade a certain way. 

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