Gold and Silver Price Analysis: Caution is Warranted in the Short-Term

SchiffGold Gold Silver Pricing Analysis

The Fed will pivot but the market doesn’t see it yet

Exploring Finance

This article first appeared on SchiffGold.

The price analysis last month concluded that the market might have seen capitulation. It suggested the FOMC and GDP could spark a short squeeze based on the overly bearish COTs report. While gold rebounded strongly, it ran into stiff resistance and more hawkish talk by the Fed. With a large pullback from recent highs, is gold about to fall through another floor or is it building support within the old range of $1750-$1800 where it was trapped for months?

Resistance and Support


Gold has broken through $1800 at least 10 times over the last two years, sometimes in explosive fashion. Each time, gold eventually runs out of steam and falls back below. $1750 has been even stronger support though, with fewer breakthroughs and smaller moves. $1800 may not be comfortably in the rearview mirror until $2100 is taken out. For now, gold is back in the consolidation range of $1750-$1800.

Outlook: Neutral


Silver has been more volatile and fell through strong support at $22 back in May. Even when gold rebounded, silver was unable to muster enough strength to get its momentum back.

Outlook: Bearish until $22 is taken out

Figure 1: Gold and Silver Price Action

Daily Moving Averages (DMA)


The false breakout in gold can be clearly seen below with a big move of the 50 DMA above 200 to only get ripped back down. With current price ($1763) falling below the 50 DMA ($1782) this week and well below the 200 DMA ($1842), momentum is down.

Outlook: Bearish

Figure 2: Gold 50/200 DMA


Silver is similar to gold with the price ($19.07) also falling back below the 50 ($20.02) and 200 ($22.69) DMA.

Outlook: Bearish

Figure 3: Silver 50/200 DMA

Margin Rates and Open Interest


Margin rates in gold are near two-year lows, but this has done little to spark interest. Open interest is also at multi-year lows. This suggests dry powder ready to ride the next big move in either direction. When open interest gets this low it generally means the next move is up.

Outlook: Bullish

Figure 4: Gold Margin Dollar Rate


The COTs report shows positioning in silver is still net short in Managed Money. This is a combination of multi-year lows in gross longs and multi-year highs in gross shorts. This suggests that shorts have taken advantage of the lower margin rates. Any increase in margin could create a forced liquidation in shorts.

Outlook: Bullish

Figure 5: Silver Margin Dollar Rate

Gold Miners (Arca Gold Miners Index)

The gold miners have been very consistently leading the price of gold in both directions. The recent price jump above $1800 was not confirmed by the miners. The last time gold was above $1800, the miners were much higher. This past week showed another poor showing by the miners indicating there may be more downside ahead in gold in the next few weeks.

Outlook: Bearish

Figure 6: Arca Gold Miners to Gold Current Trend

Looking over a long time horizon, shows how badly the miners have underperformed gold over the last decade. This shows traders have never confidently bought into any gold momentum, anticipating price advances will be short lived. When this trend reverses, gold could start flying higher being led by a surging mining sector.