Bullish Run Cools but Upside Potential Remains

Gold, Silver Weekly Forecast

• Bullish: Gold on track to end the week flat as bulls take a breather
• Talks regarding hostage negotiations and potential ceasefire contrasted with Israel’s latest advance – a ground raid into northern Gaza
• Neutral: Silver trending lower, on pace for more than a 2% decline for the week
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

Gold Price Subdued Despite Israel’s Ground Raid and Continued Bombing

Gold is highly sensitive to geopolitical conflict and therefore, it comes as no surprise to see the safe haven metal posting an exponential rise in recent weeks, near 10% from the low. However, the bullish momentum appears to have paused this week as traders assess the overbought status of the commodity and closely monitor the latest negotiations around a possible ceasefire and the release of civilian hostages.

While early indications suggest conversations are moving in the right direction, Israel appears to be pushing ahead, “preparing the battlefield” in Thursday evenings operation aimed at clearing mines, destroying anti-tank defences and gathering intelligence on positions held by Hamas.

Gold prices dipped at the start of the week but made a recovery as the week went on. US Yields remain elevated, suggesting that the dominant driver of gold is centered around its safe haven appeal. Price action has revealed a reluctance to trade higher than the $1985 level – evidenced by upper long wicks at each occasion prices traded above the level. This does not suggest that the precious metal will start selling off, even if the RSI has entered overbought territory. In times of uncertainty, gold maintains the potential for further upside.

$2010 appears as the next level of resistance, followed by the all-time high around $2081.80. In addition, gold is now well above the 200 simple moving average (SMA). In the event price action pulls back from here, support emerges at $1937 which coincides with the 200 SMA.

Gold (XAG/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

The weekly chart shows the magnitude of the move, propelling the asset above the well-defined descending channel.

Gold (XAG/USD) Weekly Chart

Source: TradingView, prepared by Richard Snow

Silver Trending Lower, on Pace for a Decline of More than 2% for the Week

In a somewhat unusual twist, silver’s price path differs from gold. While gold traded flat, silver continued its weekly descent but put in a late attempt to trade higher on Friday. Silver peaked one week ago after attempting to test the 50% Fibonacci retracement of the major 2021-2022 decline at $23.83.

At the start of the week the 200 SMA came into play, capping prices and forming the start of the shorter-term bearish move. The decline may find support ahead of the 38.2% Fib retracement at $22.35. Technically, with silver beneath the 200 SMA this suggests a bearish outlook. However, the fundamental landscape remains a major risk to this bias as long as tensions remain high in the Middle East.

Silver (XAG/USD) Daily Chart

Source: TradingView, prepared by Richard Snow

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The weekly silver chart reveals the longer-term downtrend remains intact, in contrast to the massive impulse seen in gold.

Silver (XAG/USD) Weekly Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX