With just nine days until the Olympic opening ceremony, today’s sharp appreciation in gold and silver comes at a relatively opportune moment. July has not been particularly kind to either market, with gold falling 4% lower from the month’s high, while its more volatile running partner silver lost 9%. This will likely be associated with the fact that despite high expectations, we are yet to see any of the main central banks cut rates in the wake of the EU referendum.
From a technical point of view, both markets seemed to be primed for a sharp rebound, with silver in a descending triangle and gold in a symmetrical triangle. Today we seem to be seeing the beginning of that move higher and as such, there is a good chance we could see a substantial move higher over the coming weeks.
Gold has sold off towards a crucial long-term support level, as highlighted in the weekly chart below. The confluence of the 200-week simple moving average (SMA) alongside the May 2016 and January 2015 peaks meant there was also a very clearly defined support level that had to be broken for further losses to occur. This timeframe also shows the fact we have been rallying heavily since the falling wedge breakout at the turn of the year. As such, we have a clearly defined uptrend, alongside a major support level which is yet to be broken.