Gold - Caution still warranted

The bear market rally currently transpiring in stocks has momentum on its side, with the upper range target at the cross-section between the upper resistance line and the 50-week moving average as the standing target. The below chart is an update of the S&P futures chart on a weekly basis; note the stochastic RSI looks like it wants to reach all the way to overbought as well.

Although Thursday’s action in gold looked constructive for a close over $1650 into the end of week, the opposite occurred when sellers knocked gold down $20 on the spot. The below weekly chart shows the importance of the $1650-85 range (highlighted in yellow). Gold bulls really want to see prices bottom out and make a run that can hold up. If the yellow highlighted area becomes firm as resistance after having served as support over the past two years, bulls will be in for a lower-priced opportunity as the door to $1,535 opens up.

Traders in metals derivatives might strongly consider taking out some downside insurance in this environment.

By Jonathan Da Silva

Contributing to kitco.com

Time to buy Gold and Silver on the dips