Gold is the latest commodity to break multiyear support, tough the precious metal has essentially held right at its 3 year low so far today:
While GLD has made a minor new low, front month gold futures have not made a new low. Traders are closely watching how gold reacts in the $1180-$1200 area over the next week.
Silver actually did end up making a convincing new multi-year low in September:
Silver has not been able to recover since, and my hunch is that broken support around $18 is now very stiff resistance for SLV.
A little more than 3 weeks ago, I posted my thoughts about silver in a NTT post, just before it broke down:
Part of the weakness in silver and gold has been the general selling going on the commodity sector, which is likely somewhat related to broad dollar strength since July. However, the inability of gold and silver to stage much of a bounce when the geopolitical backdrop since July has been quite heated is not encouraging. New buyers don’t seem to be plentiful, even when concerning global headlines hit.
Put all of it together, and if you made me guess the next 10% move in silver, I would say lower. However, I don’t have much conviction, and silver is already down more than 10% in the past 2 months, so the entry here right at support is hardly a good one. Though some traders might say that a convincing break of support here might be the spot to short, I am less enthusiastic about that type of trade given the risk of a false breakdown and the historically volatile nature of silver near technical inflection points.
Today, my view on gold is similar, especially since silver has already tested and broken its multi-year support less than a month ago. Options have become more expensive as many other traders are likely expecting a big move in either direction here as well. 30 day implied volatility is now near a 2014 high:
Since volatility is relatively expensive here, I don’t really see a trade that I like, but I wanted to lay out the landscape as gold is at a critical inflection point.