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Although gold trading higher for one day does not necessarily signal a reversal, any recovery could begin with this type of price action. Today gold did trade to the lowest price point during this most recent correction, trading to an intraday low of $1851.50 before recovering. However, it closed higher than yesterday’s close, and closed above its open. This marks the first day gold has closed higher in the last four trading sessions.
As of 5 PM EST gold futures basis the most active December 2020 Comex contract is currently fixed at $1872.80, which is a net gain of $4.40 (+0.24 %) on the day. However, it is the intraday low that is the most noteworthy aspect of today’s trading range in gold. The current 100-day moving average in gold is currently fixed at $1846.80, roughly $5 below today’s intraday low.
Concurrently today’s intraday low also corresponds with the 38% Fibonacci retracement that is currently fixed at $1846.20. The fact that the 100-day moving average is closely aligned with the 38% Fibonacci retracement gives this particular price point more weight as a potential area in which gold could find real support. Whenever you get two separate technical indicators which are in alignment, it magnifies the potential importance of that price area.
Silver also staged a modest recovery closing up $0.12 on the day. Like gold it also traded to its lowest intraday low witnessed during this recent correction trading to $21.81 before recovering. Currently the most active December 2020 Comex contract is fixed at $23.225. Also, today’s intraday low in silver came in just above its 100-day moving average which is currently fixed at $21.752.
The fact that both precious metals traded under pressure, but found support at their 100-day moving averages is significant. It indicates that on a technical basis investors and market participants perceived those price areas as oversold and bought the dip.
The U.S. dollar was in essence unchanged on the day closing only -0.06% lower, and is currently fixed at 93.395.
The main take away from today’s price action is how will these precious metals be trading over the next few days. That will give us technical confirmation as to whether or not today’s modest price increases are signaling a “V” recovery, or whether or not traders simply witnessed short covering.
By Gary Wagner
Contributing to kitco.com
