uploaded image
Image courtesy of Getty Images

Gold Tests Range Support, Silver Attempting to Breakout

By:Christopher Vecchio - CFA

Gold prices are down 2.50% for the month so far

  • Gold prices (/GCJ4) have moved out of a symmetrical triangle, finding support at multi-week range lows.
  • Silver prices (/SIH4) have seen sharp swings this week, but now appear to be breaking out of the downtrend from the December 2023 and January 2024 highs.
  • Precious metals may have weathered the storm in the bond market, which appears to be subsiding.

Year-to-date price percent change chart for /GC, /SI
Year-to-date price percent change chart for /GC, /SI

The January U.S. inflation report may be proving itself as a temporary setback for interest rate-sensitive assets, especially precious metals.

Fed rate-cut odds may have been decimated in recent days, but there’s a compelling case to be made that the worst is over–so long as markets remain confident that we’ll see at least one 25-basis-point (bps) rate cut in the first half of the year.

If this remains the case, then gold (/GCJ4) and silver prices (/SIH4) are proving resilient in a difficult environment. Recent developments keep the bigger picture range in /GCJ4 in focus, while /SIH4 may be offering a strong signal that rates-sensitive assets will have a tailwind in the short term.

/GC Gold price technical analysis: daily chart (August 2023 to February 2024)

/GC Gold price technical analysis: daily chart (August 2023 to February 2024)

Earlier this week, gold prices (/GCJ4) broke down out of a symmetrical triangle that’s been forming since November 2023.

Nevertheless, a shift outside of the triangle may not invalidate the view that a sideways consolidation may prevail. That view may have been vindicated in recent days, with /GCJ4 finding support in the area around $2,000, which is where traders carved out the Nov. 15 and Dec. 13 lows.

At these levels, with limited volatility (IV index: 11.1%; IV rank: 11.5), a long at-the-money (ATM) call spread would be a more appropriate expression of bullishness than a short ATM put spread. That said, a rally back into the daily 21-day EMA (one-month moving average) near 2039 may bring directionless, rangebound strategies (like short strangles or iron condors) back into focus.

/SI Silver price technical analysis: daily chart (August 2023 to February 2024)

/SI Silver price technical analysis: daily chart (August 2023 to February 2024)

Last week, we noted that “[silver prices] /SIH4 found support at the uptrend from the October 2023 and January 2024 lows. A bullish falling wedge may be coming together dating back to mid-October. A bullish daily key reversal yesterday suggests a near-term bottom may have been reached.”

Since then, /SIH4 probed the January 2024 low only to sharply reverse higher over the past two sessions. /SIH4 is now breaking the downtrend from the December 2023 and January 2024 highs (although not the downtrend from the December 2023 and February 2024 highs). Should a breakout gather pace, given the low volatility persisting (IV Index: 23.2%; IV rank: 15.1), a long directional bias may be best deployed via a long ATM call spread.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on tastylive.com apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.