Gold is showing signs of exhaustion as RSI_14 has made a double top and now has started declining.
By Bhavik Patel
Gold prices were steady yesterday and prompted buying interest as the US dollar went on backfoot because of the disappointing US Q3 GDP report. Although weaker GDP data was somewhat offset by the weekly U.S. jobless claims report that showed a decline. The World Gold Council reported gold demand in the third quarter declined 7% compared to Q3 2020. Outflows from gold-backed ETFs were the primary factor but on the other hand, jewellery demand increased as it grew 33% year on year. Central banks also purchased physical gold giving some support to prices.
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Another event also passed namely ECB’s monetary policy. The European Central Bank held its regular monetary policy meeting on Thursday. No changes in ECB monetary policy were implemented and were not expected.
In Silver, money managers increased their speculative gross long positions in Comex silver futures by 2,593 contracts to 50,040. At the same time, short positions fell by 11,788 contracts to 30,603. Silver’s net length now stands at 19,437 contracts. Silver’s net length has more than tripled from the previous week. The mining of metals is getting constrained because of power issues. Therefore, silver mining is getting affected while green energy demand is there which uses silver, so demand is increasing. This will increase the price in the long run.
Gold is taking resistance around 48300. This is proving to be strong resistance as the previous swing high was also around 48500 in the month of July. Gold is showing signs of exhaustion as RSI_14 has made a double top and now has started declining. The bullish momentum that started when gold breached $1800 is fading and we expect gold to remain sideways next week. Major data for next week would be US Non-farm payroll data on Friday.
Silver is also showing signs of exhaustion. It has taken resistance around the 200 day moving average on daily scale and after ‘Bearish belt hold’ candlestick format, prices have started correcting. The appearance of ‘Bearish belt hold’ candlestick reversal format when RSI_14 was in overbought territory shows that reversal is happening. There is also negative divergence in RSI_14 on daily scale which also suggests exhaustion from buyers. Silver needs to breach 66400 for fresh upside momentum. Next week we expect silver to trade sideways to negative with support around 62600 and resistance at 67500
(Bhavik Patel, Senior Technical Research Analyst, Tradebulls Securities. Views expressed are the author’s own.)