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Head of Fixed Income Strategy
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Technical Update - Copper, Gold & Silver. Correction might be over. Key resistance levels being tested
Kim Cramer Larsson
Technical Analyst, Saxo Bank Group
Summary: Correction in Metals on the verge of being over. Medium-term bullish technical outlook intact
Copper testing key resistance at 382.
Gold range bound sending mixed technical signals but Silver on the verge to confirm uptrend and is often “front running” Gold
Copper is testing the 200 daily Moving Average and key resistance at around 382. RSI is still below 60 threshold i.e., showing negative sentiment, but a Copper price closing above 382 is likely to change that picture.
If failing to close above 382 Copper could be caught in the 355-382 range for a little while longer
However, examining the weekly chart the bounce from support at around 355 and the 200 weekly Moving Average, RSI also bounced from 40 threshold meaning it is still showing positive sentiment.
There is no divergence on RSI so if RSI closes above its falling trendline RSI is very likely to also break above 60 which will further add to the bullish picture.
As can be seen from the Weekly chart the 0.618 Fibonacci retracement seems to be the “life cycle” for Copper corrections.
That means that if Copper closes above a 0.618 retracement a correction is quite likely to turn in to a trend. In other words, if Copper closes above the 0.618 retracement at 404.56 a move to resistance at around 447-457.70 is in the cards.
However, a move higher to test all-time highs are not unlikely
For Copper to reverse this bullish outlook a weekly close below 354 is needed.
Gold is short term caught between 55 and 100 Moving Averages - range bound between 1,934 and 1,982. Break out is needed for direction.
The RSI divergence indicates break out is likely to be to the upside.
However, if Gold closes below 1,934 and RSI closes back below 40 a sell-off down to around 1,870 could be seen.
If a close above 1,982 Gold is likely to resume uptrend. An uptrend that is likely to take Gold back to test all-time high levels around 2,070. A break back above 1,982 will also mean that the lower trendline in the rising channel on the weekly chart is intact.
There is RSI divergence however, on weekly is a bit of a concern for the upside. And if Gold breaks below the lower rising trendline a larger correction (than what we have seen so far) could unfold.
However, for the medium- to longer-term bullish picture to be reversed a weekly close below 1,800 is needed.
Silver Double Top pattern target was met (illustrated by the two vertical arrows) and the precious metal has bounced from that Double top target around 22.65.
Now trying to get back above the 55 daily Moving Average and more importantly the Double Top support line.
RSI is trying to bet back above 60 threshold which is needed for Silver to confirm the bullish trend Silver seems to be building.
Medium-term uptrend is intact and will remain intact until a weekly close below 22.65. Weekly RSI is supporting the bullish picture that is likely to push the Silver price to test the resistance around 26.
A weekly close above 26.45 is likely to fuel a move to 2020 highs around 30.
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