The Technicals: Gold Still Looks Good, Silver Looks Even Better

SchiffGold Gold Silver Pricing Analysis

The setup is bullish

Exploring Finance https://exploringfinance.github.io/
10-18-2024

This article first appeared on SchiffGold.

This analysis attempts to look at different metrics to understand the current momentum in the gold and silver markets. It is meant as an analysis on potential price direction in the very short-term (a few weeks to 1-2 months).

The last technical analysis in July was spot on, concluding that the mid-summer consolidation in gold was coming to an end. It left the door open for a down move, but the data was much more indicative of a strong up-move coming soon. That was when gold was at $2400. Now at $2700, the data below actually shows there is still room to run, especially in silver.

Price Action

Both metals have broken resistance with gold reaching a new all-time high at $2730 and silver reaching a new 10 year+ high at $33.23 on a massive up-move Friday Oct 18. Despite the recent gains, there seems to be little technical resistance anywhere in sight for either metal.

Outlook: Bullish

Figure 1: Gold and Silver Price Action

Daily Moving Averages (DMA)

Gold

Gold has made a big move pulling away from both the 50 and 200 daily moving average. This has also dragged the 50 DMA way above the 200 DMA. History suggests that the metal needs time to consolidate or even pull back some in order to give the 200 DMA time to catch-up.

The two charts below shows a a much longer history to put the current move in context. For gold, the current move is reaching a level that has previously been met by consolidation.

Outlook: Neutral to Bearish

Figure 2: Gold 50/200 DMA

Silver

Silver is in a similar situation, but earlier in the move. The longer historical chart shows that it is not yet seen a move that requires a pullback or rest period like gold, which means it should have more room to run before needing a consolidation.

Outlook: Slightly bullish

Figure 3: Silver 50/200 DMA

Comex Open Interest

Gold

Open interest is elevated but not well above average. Even though the CoTs report showed that Hedge Funds are overbought, the total open interest is still within a normal range. Furthermore, the latest CoTs report shows that Hedge Funds have actually trimmed positions while the price has continued to rise.

Outlook: Neutral to Bullish

Figure 4: Gold Price vs Open Interest

Silver

Talk about a bullish chart! The plot below shows that open interest in silver has collapsed but the price remains elevated. You can see how open interest dropped back to the levels from the start of the year, but the price remained well above the start of the year. Now open interest has a low base on an already elevated price. This means there is little room for selling but a lot of room for buying with the price already at a new high.

Outlook: Very Bullish

Figure 5: Silver Price vs Open Interest

ETF Shares Outstanding

This is a new metric for this analysis. GLD and SLV are the two most popular ETFs that track Gold and Silver. While institutions will buy these funds, this data generally shows retail interest. the chart shows the price and shares outstanding. Shares outstanding is the metric that shows overall retail interest.

Gold

While shares outstanding has moved a little higher, it is well below the craze of 2020 and 2011. It is much closer to the bottom than the top which means the retail crowd has not yet jumped on board this train. There may be cause for concern once the retail money jumps on board, but until then…

Outlook: Bullish