Technical Analysis: Gold is Building Solid Support

SchiffGold Gold Silver Pricing Analysis

Silver is stuck between industrial and monetary metal

Exploring Finance

This article first appeared on SchiffGold.

After a big miss on the Powell/Brainard nominations in November, the price analysis has been fairly accurate. Identifying the initial breakout above $1800, mentioning that $1900 was fragile support, and last month concluding that gold had found a bottom around $1800.

For the past month, gold has been consolidating within a tight range around $1850. The data suggests the next move is most likely up. Lots of indicators have bottomed, which leaves little downside remaining. The market has also priced in an extremely aggressive Fed and held up very well over that time.

It’s very possible that jobs data in two weeks will be weak. This could give the Fed the cover needed to start rolling over, proving that the Fed may be close to done on its inflation fight. Silver looks less promising in the immediate future, but should follow gold over the medium and long-term.

Resistance and Support


Gold has carved out a very nice bottom in the last month above $1800 and staying closer to its current resistance of $1850. It’s been making more attempts at $1850 than $1800. The conclusion last month was “Neutral” waiting for a break above $1850 or below $1800. While a break above $1850 might not be immediate, it seems far less likely that $1800 will break to the downside.

Outlook: Bullish


Silver is also stuck in a range between $21 and $22. The price action is not as bullish as it has made volatile attempts on both sides. It currently sits at the lower end of the range with no clear signal which direction is next.

Outlook: Neutral

Figure 1: Gold and Silver Price Action

Daily Moving Averages (DMA)


The 50 DMA ($1868) still sits above the 200DMA ($1844), but is moving down with the price below both. This is very typical and healthy in bull markets. A previous analysis highlighted how rare it is to see a dramatic and consistent pull-away from the 50 from the 200. The retest helps build stronger support in bull runs. While the current price sits below both averages, the pull-back looks to be in a bottoming phase.

Outlook: Bullish

Figure 2: Gold 50/200 DMA


The silver 50 DMA ($22.44) has crashed back below the 200DMA ($23.39) forming a death cross. This is a bearish indicator. While silver typically follows gold, the death cross should not be ignored. It’s possible that in a recessionary environment, silver could get sold harder as an industrial metal versus buying on monetary security. Gold is less prone to such an outcome.

Outlook: Bearish

Figure 3: Silver 50/200 DMA

Comex Open Interest

The two charts below show the open interest compared to the price in both gold and silver. The overlap is not perfect, but major moves in one generally occurs in tandem with the other as speculators push and pull the price around with paper contracts.


Current open interest is hovering near the lows over the last two years (around 500k) but the price remains in the middle of that range ($1825). This means there is less downside potential and more dry powder that could push the price to new highs if it breaks through upper resistance.

Outlook: Bullish

Figure 4: Gold Price vs Open Interest


Silver open interest is near the lows not seen since March 2014 (except for the March 2020 flash crash) yet the price remains much higher than at any point over that time period. Similar to gold, this means there is dry powder and not much more selling pressure left.

Outlook: Bullish

Figure 5: Silver Price vs Open Interest

Margin Rates


Margin rates have stayed flat ever since they were raised up to $7200 in the wake of the massive price surge in March. Given where open interest sits, it seems more likely margin would be lowered rather than raised at this point. They may also want to give themselves more ammunition to increase rates if the price jumps again. Lowering rates would be a tailwind.

Outlook: Bullish

Figure 6: Gold Margin Dollar Rate


Silver fell even as margin rates were being lowered. Rates are now below the levels from June 2020. There is plenty of room to raise rates to counteract any price advance, but there seems little reason to drop rates lower given the market uncertainty.

Outlook: Neutral to Bearish

Figure 7: Silver Margin Dollar Rate

Gold Miners (Arca Gold Miners Index)

This week was the first time in a long time that a big move down in GDX/Gold Miners did not front-run a move down in the metal. Gold was very flat both Thursday and Friday, yet the GDX saw a massive +4% sell-off on Thursday and then gained much of it back Friday, rising 2.6%.

Typically, the miners lead the metal but this week looked like a head fake. Not only that, but GDX finally made a new lower low in the current up move which could be a reset on the technical analysis. This means that GDX could be setting up for a monster rally if gold is able to break through overhead resistance.

Outlook: Either Bullish GDX or Bearish Gold

Figure 8: Arca Gold Miners to Gold Current Trend

Looking over a long time horizon, the HUI is not yet at all-time lows against the price of gold as shown below. That being said, it’s at the lowest point since May 2020 which is right before gold kicked into high gear. GDX has been a losing trade for a decade now, maybe it’s finally getting ready to turn a corner.