Since late June, gold has been rising almost every trading session, reaching $1822 per troy ounce on Friday morning. The easy part of the rise is left behind, and now the bulls have to prove that they are serious.
Over the last three weeks, the systematic rise has only recouped half of the losses from last month’s drop. Despite the sustained presence, buyers are acting much more cautiously or simply have less strength.
The latest bounce took the prices yesterday to the area between the 50- and 200-day moving averages. A decisive move higher can initiate a rally in the following days, as the crossing of these lines often triggers a mechanical market reaction in the direction of the break-up.
In the last 24 hours, gold lost its growth impulse, wandering around its 200 MA, a precursor for a prolonged consolidation or a reversal downwards.
Mostly this month rally has been due to the support of a long-term uptrend. Fundamentally, the trend was shaped by the soft monetary policy of the major central banks, led by the Fed.
Earlier this week, Powell confirmed the continuation of the pigeon policy. We got the same signals from the ECB and from the Bank of Japan today.
Even more exciting and contradictory is the picture of silver. It missed the rally of gold and moved in a very narrow $25.6-$26.4 range for the last four weeks, and it found firm support at the 200 MA.
We will soon get a confirmation that the QE and inflation are no longer the drivers for gold and silver. It will happen in case of the break-down of the crucial supports at $1750 and $25.5, which were the previous local lows for these two metals. The key support for silver is one step away from the current price so that we might get a meaningful signal for the direction of the precious metals here.
Whichever way the price goes, the dynamics promises to be bold and indicative, as both sides have built up strength over the weeks of consolidation, and speculators have pulled stop orders close to the market quotes.
