Gold and Silver new highs, beware the RSI’s.

Headlines continue to drive Gold and Silver higher despite very stretched RSI’s.

Gold

Gold pushed higher again overnight despite the very overbought technical picture. The rally was driven by escalating Korean peninsula tensions and dovish comments from Fed Governors Brainard and Kashkari that weakened the dollar in general. In a welcome corrective pullback, it fell to 1326.00 overnight, before flying higher by 19 dollars at one stage to touch 1345.00. Traders yet again reassessing the future pace of Federal Reserve rate hikes ahead of this month’s FOMC meeting.

Gold’s safe haven status and its high inverse delta to the U.S. dollar index (DXY) is clear to see, subsuming the very overbought RSI in the process. We expect gold to remain headline driven for the remainder of the week but would caution its possible vulnerability in the short term should the dollar unexpectedly strengthen.

Gold has closed above daily resistance at 1337.50, trading at 1339.00 in early Asia. This notionally implies gold should continue progress to its next target at 1375.00 with interim resistance at the overnight high. Support lies at 1325.00 and then 1296.00.

Gold Daily

Silver

Silver pushed higher with gold, but despite touching 18.0100, it fell back to close unchanged on the day at 17.8900. This perhaps belies some cracks in Silver’s price action. Although we have now had two successive closes above the 17.7100 resistance level (now intra-day support), Silver has traced out a double top at the overnight high around the 18.0100 area.

More concerning technically, the RSI is now in extreme overbought territory where it has been for the last couple of days. This could make Silver more vulnerable to a corrective pullback, especially given the unimpressive unchanged closing price.

Geopolitical headlines could see Silver spike higher on a short term basis, but traders may well be wary adding to longs up here until we see the RSI correct lower.

Silver Daily

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 Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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