The most recent price action in the precious metals market should make this month’s technical analysis particularly interesting, as, following a strong surge to the upside, gold and silver prices got hit with a bit of a beatdown. They suffered through a double whammy. First, they got whacked by the June job numbers via the monthly NFP report. Prices almost immediately began to recover, but then got secondarily smacked a few days later by the Fed’s indication that it’s not looking to cut interest rates anytime in the very near future.

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(Note: I’m writing this around Tuesday, June 18th, just to give you a point of reference for my analysis. Obviously, any significant price movement occurring since that time should be taken into consideration as you’re doing your own market analysis. The Usual Disclaimer: I’m not clairvoyant. I do not, unfortunately, have the ability to unerringly predict the future. I know, I know – that’s really unfortunate, as life would be much simpler and more profitable for us all if I did have an infallible crystal ball in my possession. But since I don’t, you should always do your own due diligence, perform your own analysis, and make your own trading decisions. After all, it’s your money that you’re trading with. Whatever I say here should be no more than just one element among many for you to consider in making investment decisions.)

Technical Analysis of Gold – Most Recent Price Action

Let’s first take a look at a daily gold chart and examine the price action over the past month – in other words, since my last technical analysis review. Then, of course, we’ll take a look at the most recent price action in light of the daily price movement over the last few months.

(Yet another note: My chart analysis is done looking at a gold futures chart. There is, of course, typically a slight difference between the spot price of gold and the most nearby gold futures price. If there’s ever a huge difference, I will endeavor to alert you to that fact.)

Okay, let’s see…about a month ago, gold was sitting at $2,391. It’s currently, as I type this, sitting at $2,328. Boo! Hiss! Yes, I would prefer to be relating to you each and every month that, “The price of gold has, once again, doubled”. However, that’s just not the way things work. Market prices move up and down in any trend. Lately, they’re down a bit – however, that’s only following a strong surge to the upside that took the market to an intraday high of $2,454, with a high close of $2,431, scored back on May 20th.

The daily gold futures chart below shows the daily price action year-to-date.

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The blue line on the chart is a 20-period exponential moving average, and the red line is the 50-period moving average. The price of gold has, obviously, moved substantially higher from where it started the year, around the $2,000 per ounce level. The more recent price action has shown gold twice encountering resistance and retracing from around $2,450.

The current downside retracement appears to be finding support around the same price range as the previous retracement – around $2,300 to $2,350. The 50-day exponential moving average is right in the middle of that price range, at a bit above $2,325. Again like previous retracement, the price has dipped below the 20-day exponential moving average. However, there is a difference this time around. The previous pullback stopped still well above – by about $100 - the 50-day exponential moving average. The current downside move is currently sitting right around the 50-day moving average. However, it’s worth noting that the 50-day EMA is now quite a bit higher than it was back then, having moved up from about $2,250 to the current level around $2,325.

I would think that the 50-day EMA currently represents an important price support level. If the price of gold were to fall significantly below the 50-day EMA, the next logical support level from a technical analysis standpoint looks to be back down around $2,238 or $2,150. The $2,150 level is where gold consolidated its substantial price gains back around the end of March.

Personally, I would not want to see a drop of that magnitude happen, because I would tend to think that might actually signal a major trend change – as in changing to a downtrend - yuck. However, at the moment anyway, I don’t really consider that big a decline in price to be very likely. Why not? – Well, essentially, I just don’t see gold bulls being anywhere near that weak, or gold bears being anywhere near that strong. I think there’s evidence to support that view in the way that buyers immediately came back in and pushed the price back up over the 50-period EMA on Monday, June 10^th, following the Friday, June 7^th crash.

Of course, one could make the argument that the double top in gold around $2,450 signals the end of the controlling uptrend. However, one could just as easily argue that, after zooming up from $2,200 to $2,450, a simple pause is in order before gold can recover sufficient upside momentum to push significantly higher.

A couple of points:

1. We’re still in a solid uptrend that extends back over the past decade.
2. When gold finally broke through the long-term resistance at the $2,000 level, it smashed through it – with 10 straight up days that took the price all the way up to around the $2,200 level. And it only retraced about 25% of that move before rocketing another couple of hundred dollars higher, to the $2,400 level.

So, I’d say that the essence of where we are is watching to see if the 50-day moving average holds up as support and if price can regain a foothold back above the 20-day moving average. You’re looking at a fairly narrow range between support around $2,300 and resistance around $2,400-$2,450.

Okay, let’s move on and take a look at the longer term price action in gold.

Long-term Technical Analysis of Gold

Looking at the weekly gold futures chart, a couple of things jumped out at me right away – well, three things actually – 

1. The weekly chart shows the overall uptrend still safely in place, as the price action in gold, even after the recent pullback, is still well above the 50-period EMA (red line on the chart).
2. The weekly chart does show a gap that the market might look to fill. Filling that gap would draw the price of gold down to $2,238. That opens up the possibility of the market selling off a bit more from its current level before turning back to the upside.
   That possibility starts to look a bit more possible when you project price action forward a little. You can then perhaps see that a move down to fill that gap might have price coinciding with a future – somewhat higher - level of the 50-week moving average.
3. The MACD does appear to make gold look ripe for a bit of a sell-off. It’s at a relatively high level and was just a few weeks ago around the highest positive level that it’s been in the past four years…the MACD signal line just did a crossover to the downside…and the MACD histogram just crossed from above the zero line to below the zero line. However, even though the MACD is currently indicating overbought conditions in the market, it wouldn’t take anything more than a few weeks of gold prices just consolidating around the current price area to level out the MACD.

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A fall back to around $2,230 would also be approximately a 50% retracement of the overall up move from $2,000 to the $2,450 high. However, I still have a bit of trouble envisioning gold selling off that much. For one thing, thus far, it appears to have caught fairly solid support at the initial support level around $2,300. But should gold start to decline below the $2,300 mark, then that gap at $2,238 does give us perhaps the next logical price level where we could look for support to form.

The MACD on the monthly gold chart, shown below, is still showing strong upside momentum, although the MACD signal line looks to me to be at a level where it might roll over, at least temporarily, to the downside. Price action, like on the weekly chart, shows the potential for a further drop down to fill a gap left at $2,238. For the monthly chart, I’m using a 12-period EMA (red line). You can see that price movement has been pretty well hugging that line extending all the way back to 2003. Price action has been more often above than below the 12-month EMA since 2018.

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Technical Analysis of Silver – Most Recent Price Action

Well, the price action in silver looks a lot like that in gold – not exactly shocking. A month ago, the price of silver was happily higher – in fact, hitting a new high for the year at $32.75. Currently, in the wake of the recent downdraft, it’s trading around $29.40. Again, I’d prefer to be reporting higher, rather than lower, prices, but I don’t always get my way in the markets. I’d love it if COMEX rang me up every day and asked me where I’d like them to peg the price of silver, but, alas, they don’t do that.

Here's the daily silver futures price chart, showing the year-to-date price action. (Hey, at least we’re still way higher than we were back in January, around $23 an ounce.)

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As with gold, silver is trading between its 20-day and 50-day exponential moving averages. (By the way, I always favor using exponential moving averages, which reflect giving more weight to the most recent price action.) The 50-day EMA is at $28.84. In respect to that, silver appears to have held up a little better than gold, as there hasn’t been a close below the 50-day moving average. In fact, the market’s price action has barely touched it. The 20-day moving average is currently pegged at $29.89.

You can again see something of a similarity to gold’s price action in that the support and resistance levels aren’t very far apart. The 20- and 50-day moving averages in silver are about $1.00 apart – the support and resistance levels in gold are about $100 apart.

There’s been, however, a significant price action disparity between the movement of gold prices and silver prices – one in silver’s favor. The current downside retracement in gold is from a high at roughly the same price level (just a little higher) than the previous high it scored back in April. In contrast, silver notched a substantially higher high for the year around mid-May – at $32.75 - than its April high, which was still a hair below the $30 price level. Thus, the current pullback in silver prices has only taken the market back down as far as its previous April high.

My current opinion on silver is essentially the same as my viewpoint on gold – that it’s important for silver, if it’s going to move higher from here, to hold the support around the 50-day moving average. Just as breaking through key resistance at the $2,000 level was key for gold, breaking through resistance at the $30 price level was key for silver. Like gold, it ran strongly higher once it did break through that resistance. The recent downside retracement looks, from a purely technical analysis viewpoint, like a test to see whether or not the $30 price level has, indeed, flipped from being resistance to being support in the silver market.

As is the case with gold, I’m encouraged by how silver bulls quickly responded to each of the strong pushes to the downside that occurred, respectively, on June 7^th and then on June 13^th.

Long-term Technical Analysis of Silver

When it comes to looking at silver long-term, I’m not sure that you even need to look at a chart. Instead, I’d refer you to the recent article that I wrote here on the basic supply and demand picture for silver. With demand outstripping the available supply by more than 20%, and with demand showing continuing substantial increases, I just don’t see how you can make a convincing case for lower silver prices. That utterly illogical argument would have to be, “Well, we’re mining a lot less silver than we’re using every year…so I think the price of silver will drop.” Say what???

Now, before I say this next part, I have to confess that I’m more than a little biased to the bull side, as I have a lifelong love affair with silver. For many years, in keeping with the lyrics of Gregg Allman’s hit song, “Midnight Rider”, I always walked around with “one more silver dollar” in my pocket.

Okay, having said that, personally, I remain convinced that, at some point, the price of silver is just going to sprint to a new all-time high above $50. The supply and demand equation for silver argues in favor of that, and gold soaring to a new all-time high more than twice its record high of $1,000 set back in the 1980s also argues for that as well. Of course, on the reality check side of things, I’ve been sitting here, drumming my fingers on the table, waiting for that to happen for almost a year now. However, I do take some encouragement from the recent drop in the gold/silver ratio (down from around 90 to around 75).

Okay, well, let’s take a look at the weekly silver futures chart and see where it appears that we stand.

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The silver weekly chart closely resembles the weekly chart for gold. As with gold, the price action is still well above the 50-period EMA. Also similar, the MACD appears to indicate overbought conditions, as it’s at a relatively high level. However, unlike the chart for gold, the weekly chart of silver isn’t yet showing downside crossover signals by either the MACD signal line or the MACD histogram – although it’s close to doing so.

If you look back to the last time that the MACD was at an extremely high level, from where it rolled over to the downside, that signaled a turn to a downtrend that continued to drift silver prices lower over the next two years. But one should keep in mind, that shift to a downtrend occurred at the height of the pandemic. Therefore, I doubt that it’s a pattern that’s likely to be repeated.

If the current retracement in silver prices does extend significantly lower, then the next probable support level is down around $26.50 to $27.00. That’s where the market found support after a retracement from previous highs around $29.00. Is that going to happen? At the moment, the silver market has us hanging in suspense, with price lingering right in the middle of the current $29.00-$30.00 support level.

The monthly silver chart looks encouraging to me – for one principal reason. The downsloping trendline that I drew (thick blue line) connecting major highs in silver shows a strong breakout above that line, to the upside, occurring last month. Also, a glance at the MACD doesn’t indicate the same overbought conditions that the weekly chart shows. In fact, it shows silver prices really just starting to turn strongly positive in the past couple of months. The MACD signal line only recently did a crossover to the upside, and neither the signal line nor the MACD histogram are at particularly high levels.

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(Note: For the monthly chart, I changed the EMA – red line – to a 12-period EMA, as I did on the monthly gold chart.)

Technical Analysis of Gold and Silver – June, 2024 – Conclusion

To sum up, despite the recent smackdown following the June NFP report and the latest Federal Reserve meeting, gold and silver still look to be safely in long-term uptrends. Both are currently trading around nearby support levels.

Gold
Nearby support level - $2,300
Next support level - $2,238 – then $2,150
Resistance - $2,400-$2,450

Silver
Nearby support level - $29.00
Next support level - $27.00
Resistance - $32.75 (recent high) – then $35, $40, and $50

One possibility that occurs to me as I compare the current gold and silver price chart action is that of gold either flatlining in a range or drifting a bit lower while silver pushes higher. That’s partly based on the different MACD readings for gold and silver showing on the longer term weekly and monthly charts. It’s further based on a possible continuing drop in the gold/silver ratio and on the overall supply and demand situation with silver, which presents a strong argument for higher silver prices.

Oh, one more thing I want to mention: seasonally, gold and silver prices tend to turn higher at the end of June, and continue marching substantially higher through September. However, thus far this year, they’ve gone counter to historical seasonal tendencies – rising substantially from the first of February to June, a timeframe over which they usually tend to decline a bit.

• J.B. Maverick

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Sources:

https://www.tradingview.com/

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