Will Gold and Silver Enjoy Some Hammer Time?

Gold and Silver’s price action this week has not been constructive, but salvation may be at hand in the form of inverted hammers.

Since last week’s emotional U.K. election, neither gold nor silver’s price action can be described as anything other than bearish from a technical perspective. Silver has most certainly led the way in this respect, plunging through it’s 100 and 200-day moving averages. Many traders (myself included), have probably been left scratching our heads in fact, that so much uncertainty with regards to the U.K and Europe, and a weekly dose of Trump accusations and a weaker U.S. Dollar have seen both precious metals on a one-way path, to the downside!

It has left me to make a few conclusions regarding precious metals at the moment.

  1. The street is suffering from Trump-fatigue with regards to the almost weekly sets of new allegations and lawsuits that seem to be heading his way. For the record I have no opinion either way, my conclusion is that one of them will have to finally “stick” to see some risk aversion buying in precious metals appear.
  2. The U.K.’s nightmare election scenario seemed to be a case of buying the rumour and selling the fact. The price action post the election, and again I say this with all due respect to Her Majesties Kingdom, suggests that the travails of the U.K. and Brexit do not carry a huge weight in the geopolitical global food chain.
  3. The U.S. Dollar has been weaker over the last seven days, temporarily accelerated by last night’s U.S. C.P.I., yet both gold and silver are lower against the dollar? It could imply that there was an excessively large amount of short-term long positioning in both metals, most likely above 1280.00 and 17.4000 respectively.

However, from a technical perspective, some help may be at hand with both metals displaying inverted hammer candlesticks after yesterday’s trading session. I will confess to not being a candlestick expert and having to call on a former expert colleague to confirm. It is gratifying that he did and he has my thanks! The inverted hammer patterns in

The inverted hammer patterns in Chartist speak are regarded as bullish if they come at the end of bearish price action. I must emphasise they are only indicative of the possibility of a bullish turn. To be confirmed as valid we must see bullish candles on the following days. Thus, from a technical perspective, we will have to await the finish of today’s session to confirm.

We will look at both metals on the charts below with the inverted hammer’s highlighted.

GOLD

Gold has an apparent failure and double top at 1296.00, and it was perhaps no surprise, that it is giving up so much of its gains after the 2nd failure. It remains the key technical pivot for gold’s longer-term direction.

It has nearby support at 1261.00, today and yesterday’s low and an area of previous congestion. Behind is 1246.00, previous lows and the 100-day moving average with 1240.00, the 200-day moving average, below.

Gold Daily

SILVER

Silver failed twice above 17.7100 and led gold lower. This now becomes significant pivotal longer-term resistance.  It broke its 100 and 200-day moving averages as it fell with both lying at the 17.5050/17.5150. The region forms the first major resistance should silver rally meaningfully.

Below, support is layered with the initial level being today’s low at 16.8300. After this, we have a double bottom at 16.5800 followed by long-term support at 16.1910.

Silver Daily

Summary

Gold and Silver may yet have some time in the sun after a cloudy week. But for both to enjoy some inverted “hammer time” we must first await confirmation from the following day’s price action.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.