Gold and silver extending the downside to key Fibo targets

  • Precious metals on the back foot into the close for the week.
  • Bearish pin bar and subsequent negative close at the end of the week paints a compelling bearish case.

Precious metals were on the back foot into the close for the week, suffering from an increasingly risk-on market place. Gold travelled between a high of $1,509.04 and a low of $1,485.91, -0.60% on the day while Silver outpaced on the downside, falling over 3% from a high of $18.18 to a session low of $17.39. December gold on Comex dropped $7.90, or 0.5%, to settle at $1,499.50 an ounce to complete a weekly decline of 1.1%. Silver for December delivery fell 60.8 cents, or 3.3%, to $17.569 an ounce which was its worst finish since Aug. 23rd.

It was quite an eventful end to the week, starting with the European Central Bank and US Consumer Price Index yesterday, while on Friday, US Retail Sales was the focus, beating expectations as attention moves towards the Federal Reserve next week. 

"After taking back the initial gains of the ECB decision, gold ultimately remains anchored to the $1,500/oz level. Despite the view that the ECB stimulus was not enough, with the ECB restarting QE and our macro strategist expecting the amount to increase to €40bn/month in March, the continued buying of haven assets should keep these assets trading at a hefty premium, including gold. Furthermore, with the FOMC now on center stage, expectations remain fairly unchanged with expectations sticking at a 25bps cut, but signalling of additional cuts this year will be the main driver," 

analysts at TD Securities explained. 

Gold levels

The bearish pin bar and subsequent negative close at the end of the week paints a compelling bearish case on the daily chart Gold changes hands below the 21-day moving average. The price is tsting the 38.2% Fibonacci retracement around the 1490 mark and the case is set for an advance to a 50% man reversion of th late June swing lows to recent highs around 1470 that guards the 19 July swing highs at 1,452.93. Bulls will need to get back above 1,550 which then guards prospects for 1,590 as the 127.2% Fibo target area. 

Silver levels 

The precious metal dropped below the 21-day moving average and has subsequently moved in on the 17.50s and some, printing a low of 17.39 below a 50% Fibo of 2016 highs to recent swing lows. The price is now resting on the 38.2% Fibonacci with next target beyond th 50% reversion of 16.80 down at the 61.8% at 16.11.

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