Macro: Sandcastle economics
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Technical Update - Metals facing larger corrections. Here are the levels to which Gold, Silver, Platinum and Copper can sell off
Kim Cramer Larsson
Technical Analyst, Saxo Bank
- Gold holding on above key support. If broken, sell-off to 2,220 in the cards
- Silver double top pattern unfolding with bearish target to 28.50, maybe even 26
- Platinum testing key support around 1,015. Bearish move can push it to 974
- Copper correction eyeing support at 446. Will it hold?
Gold XAUUSD has now several times been testing the key strong support at 2,326 and dipped down to the 0.786 retracement at 2,314 on one occasion. If closing below 2,314, a swift sell-off down to support at around 2,277 is likely. If taking out that support, there is further downside potential to 2,222–2,195.
The strength indicator RSI is still in positive sentiment but has been showing divergence for quite some time, indicating uptrend exhaustion for gold and a possible correction.
For gold to resume uptrend, a daily close above 2,365 is required.
Double top pattern? One can argue that gold is forming a double top pattern, an ugly pattern, where the first peak is not that distinct and significantly lower than the second top, hurting potential performance. A daily close below 2,277 is required for confirmation.
Silver XAGUSD has formed a double top pattern.
Potential downside target: As a rule of thumb, the price should come back down to the base prior to the build-up, i.e., at around 26. However, the target performance often reaches less than that. Measuring the distance from the top to the valley of the double top pattern and subtracting that from the breakout price, i.e., the valley, indicates a downside potential to 27.57, as indicated by the two vertical arrows.
However, a sell-off could be cut even more short; the 0.618 retracement of the April to May uptrend is at 28.50. Almost exactly the same price as the 1.618 projection of the double top pattern (28.52).
If silver is closing back above the right top, i.e., above 32.30, the uptrend is likely to resume, and the pattern is busted. If closing back above the valley, i.e., back above 30.05, the bearish scenario is busted.
Platinum XPTUSD got hit by heavy selling after reaching the 0.618 retracement at 1,066 and is currently trading around the support area 1,015–1,000.
If closing below 1,015, further selling could be seen down to the 0.618 retracement at 974.50. The 55 daily moving average is adding to the support.
If closing back above 1,015, the uptrend is likely to resume. The RSI is still showing positive sentiment with no divergence, indicating platinum is likely to trade higher after a correction.
However, if RSI is closing below 40, that potential bullish scenario is cancelled.
Copper is breaking below the 0.618 retracement at 460.80 and seems destined to drop lower to the stronger support at around 446.
If RSI, which is still showing positive sentiment but also divergence, is closing below the 40 threshold, the bearish move is likely to continue.
A daily close below 446 could fuel further selling pressure down to the 0.618 retracement at 424.40.
If closing back above 470, copper is likely to resume uptrend
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