Moving in on More Metal Milestones

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"The psychological $1,300 level is the next magnet for prices."

Gold - $1,278.05 // $3.75 // 0.29%

Gold will try to add to last week's impressive gains, which saw the metal rise $30 over the period. Momentum is still the primary near-term catalyst for prices, with last week's breakout above $1,265 likely attracting the attention of many short-term traders. The psychological $1,300 level is the next magnet for prices, but we would expect a bit of consolidation (at the very least) before prices can advance meaningfully higher.

Technical Outlook: Prices continue to inch higher toward resistance at $1,290.85—the 123.6% Fibonacci extension of the 6/21–7/28 downswing. Near-term support lines up at $1,265.30—the mid-June swing top.

Longer term, gold positioning reveals bearish cues that hint a major top may be taking shape. Confirmation of a downward reversal in line with our fundamental outlook requires a weekly close below a rising trendline set from the swing bottom in late 2008, now at $1,282.67.

Silver - $20.81 // $0.06 // 0.28%

Silver rose almost $1/troy ounce last week, strongly outperforming gold on this latest upward move. Precious metals traders and investors have been focusing their buying efforts on the cheaper metal, sending the gold/silver ratio plunging. The ratio, which measures the relative performance of gold and silver, has fallen to 61.4 from as high as 68 just a few weeks ago. A higher ratio means that gold is outperforming, while a lower ratio means that silver is outperforming.

Technical Outlook: Prices have put in a bearish Shooting Star candlestick formation below resistance at $20.82, hinting a pullback is ahead (though confirmation is required on a bearish close of the current daily candle). A turn lower will target support at $20.13—the 23.6% Fibonacci retracement of the 7/28–9/17 rally. Alternatively, renewed bullish momentum will seek to challenge the $21 figure.

Technical outlook for Gold

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