Gold, silver down; bearish chart pattern in silver spooks bulls
Gold and silver prices are lower near midday U.S. trading Wednesday, on profit taking from the shorter-term futures traders. Stiff technical resistance at the record highs just above present price levels are also giving the gold and silver bulls pause at mid-week. February gold was last down $40.10 at $4,456.00. March silver prices were down $3.81 at $77.19.
The daily bar chart for March Comex silver futures shows this week’s price action--especially today’s big down day--may be producing a bearish double-top reversal pattern. Price action in silver the rest of this week will be extra important in determining whether the bearish double-top will be confirmed. Traditional technical analysis suggests that a bearish double-top reversal pattern is confirmed when prices drop below the trough level between the two tops. In silver’s case at present, that would mean March futures prices dropping below $69.255. It’s likely that a large amount of pre-placed sell stop orders now lie just below that price level. I still suspect the daily price action in silver will continue to lead gold prices.
In other news, China’s central bank extended its gold-buying streak to 14 months, underscoring sustained official demand for bullion as prices surge to record. Bullion held by the People’s Bank of China rose by 30,000 troy ounces last month, according to data released on Wednesday and as reported by Bloomberg. That brings total purchases since November 2024, when the current buying cycle started, to around 1.35 million ounces, or 42 tons. Gold has experienced a price-volatile run in the last few weeks, after surging to a record high last fall. Still, the metal delivered its best annual performance since 1979 on the back of central bank purchases, geopolitical angsts as well as debasement trades — a retreat from sovereign bonds and currencies for alternative stores of value.
The key outside markets today see the U.S. dollar index slightly firmer. Crude oil prices are down and trading around $56.50 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.15%.
Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.
Technically, February gold futures bulls’ next upside price objective is to produce a close above solid resistance at the contract/record high of $4,584.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,200.00. First resistance is seen at the overnight high of $4,512.40 and then at $4,550.00. First support is seen at today’s low of $4,432.90 and then at $4,400.00. Wyckoff's Market Rating: 7.5.
March silver futures see today’s price action raising the specter of a bearish double-top reversal pattern forming on the daily bar chart. The bulls’ next upside price objective is closing prices above solid technical resistance at the record high of $82.67. The next downside price objective for the bears is closing prices below solid support at last week’s low of $69.225. First resistance is seen at $79.00 and then at $80.00. Next support is seen at $75.70 and then at $75.00. Wyckoff's Market Rating: 7.5.
