Gold and silver regroup but remain bearish

Last week was one of consolidation and regrouping for both gold and silver, following the calamitous falls of the previous week which finally injected some momentum into both precious metals following the extended sideways price action of the summer months. For silver, price has been contained in a very narrow range, with the ceiling of resistance defined with the red dotted line $17.75 per ounce, and the floor of support now building in the $17.20 per ounce area and denoted with the blue dotted line.

To date we have also seen a pivot low and pivot high delivered at these levels and further confirming the boundaries of the current congestion channel. Once again, support is now key, and should the $17.20 per ounce level be breached, the price of silver will then continue lower, and down to test the further potential support regions below in the $16.60 per ounce area, and $16.40 per ounce respectively. Overall sentient remains bearish with the trend monitor remaining bright red, and with the volume point of control adding additional downwards pressure from the $20 per ounce level.

The technical picture for gold is similar. The break below $1308 per ounce was the trigger, with gold prices now consolidating between $1265 per ounce to the upside and $1244 per ounce to the downside, and as for silver building a corridor of price action. Here too the volume point of control is adding further downwards pressure from the $1340 per ounce area, and should the current floor of support be breached, then gold looks likely to return to test the $1210 per ounce region in due course.

The weekly COT data continues to confirm the current picture for both gold and silver, with managed net longs for the precious metal falling from 244,662 to 201,353 with a consequent rise in net shorts from 39,486 to 47,577. For silver the managed net longs have fallen from 89,114 to 72,710 with shorts increasing from 22,695 to 25,018.

By Anna Coulling