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Gold and Silver Technical Analysis Forecasts Negative Outlook

ICE Markets

Yesterday the latest Federal Open Market Committee (FOMC) meeting took place, resulting in the expected rate cuts by 25-bps. The Greenback has so far responded by breaking out into a two-year high, but how has this affected the precious metals and their previous winning streak?

As a result of the predicted Federal Reserve price cuts, Gold is currently on the verge of reversing the recent triangular breakout pattern indicating that the recent wedge breakout is under siege. A reversal of Gold’s previous bullish pattern could quickly turn into a heavy selling market, as traders that invested in Gold during the ‘building of the wedge’ congestion phase, are now likely to find themselves at a loss. When looking at the chart we can see that a breach is looking relatively probable due to the bottom-side t-line. The initial support of the wedge bottom was at 1381, this was then followed by 1375 and is now down to 1340 where the initial breakout of the wedge commenced. Gold is now at a critical spot; a bullish outlook could remain intact, as long as Gold can hold on and resist sinking back inside the wedge parameters.


Turning the spotlight onto Silver the precious metal is no longer performing well, turning hard off the 2003 trend-line. Recently Silver has been situated on the underside of the trend-line seen in 2003, which capped the price at the commencement of the year, however the forecast is changing rapidly. If Gold goes onto reverse the wedge with force, then Silver may continue to sell well, which has the possibility of a consolidation pattern forming at the long-term trend-line. However, additional selling may see the trend-line from May’s low arrive, with the horizontal support from March and June being significant, as demonstrated via the chart below.


Forex traders are advised to closely monitor Gold’s reaction moving forward this week, specifically in relation to the potential wedge reversal. Traders that invested during Gold’s bullish momentum will need to keep a close eye on whether the value of Gold can withstand the current market climate, or whether prices will begin to decline.
At the time of writing Gold was at a low of 1407.58 and Silver was at a high of 16.028.


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