Following the FOMC announcement on Mar. 15, gold and silver rallied aggressively into the close of trading. The precious metal rally sets the stage for another move to upside, following price declines throughout March. With both silver and gold at critical technical junctures, how the price acts over the next few weeks could provide clues as to whether gold and silver proceed in an overall uptrends or downtrends over the longer-term.
SPDR Gold Trust (GLD) rallied 1.87% on Mar. 15, breaking out of a small consolidation that began on Mar. 9. In the short-term, the uptrend that began in December looks to be continuing, with the price now expected to move back toward the Feb. 27 intraday high of $120.40. A decline back below $114 would paint a more bearish picture, and a drop below the Jan. 27 swing low of $112.81 would negate the short-term uptrend and could mean a decline below $108.
The longer-term outlook hinges on which of those scenarios develops. A rally back above $120.40 would help confirm a long-term uptrend. The higher the price runs, the more likely it is that the decline in the last half of 2016 was just a pullback within a long-term uptrend (which began at the start of 2016). A long-term uptrend would mean the gold ETF eventually moves back above $131.15 (2016 high).
There is still a possibility the decline that began in mid-2016 is still underway, and that the rally from December to February was just a pullback (higher) within that downtrend. Declines back below $114 and $112.81 and would signal that is a possibility. A downtrend is expected to make lower swing lows; therefore, the price could drop through $108 and head toward the next support level near $101.
A lot to think about with the price at a critical juncture. For now, long trades are favored, with a stop loss below $113.75 (or $112.70).
iShares Silver Trust (SLV) jumped 2.75% on Mar. 15, marking a possible end to the short-term decline that started on Mar. 2. If that is the case, the uptrend that began in December is continuing, with the price expected to rally toward the Feb. 27 intraday high of $17.53. If the price declines back below $15.94, and especially $15.84 (Jan. 26 swing low), this short-term uptrend could be over as price heads toward $15 or below.
As with gold, the longer-term outlook for silver hinges on whether the price reaches the February swing high or the December swing low, first. Declines below $15.94/$15.84 set the stage for a decline to the December swing low at $14.85. Below that, the next major support area, and the target is the $13.50 region (early 2016 levels).
The bullish case is that the silver ETF moves toward the February high of $17.53. If that level is exceeded, it helps confirm both the short and long-term bullish trends, with the price expected to eventually rally above the 2016 high of $19.71.
Once again, a lot to think about. It can be simplified to this: longs are currently favored, with a stop loss below $15.75.
The Bottom Line
Long-term, gold and silver and are still in uptrends based on the 2016 rally. Short-term momentum is also with the bulls, as the prices have been in a small uptrend since December. The uptrends favor a move back above the February highs, and if that happens, the 2016 highs could also be reclaimed.
If the price starts sliding below recent support levels, that's bearish. A sell off at this technical juncture could take gold and silver prices back to December lows, or even early 2016 levels. There is a lot of upside for buyers if the longer-term uptrend unfolds, but placing a stop-loss below the recent support levels is a prudent play in case the prices reverse to the downside.
Disclosure: The author doesn't own the ETFs mentioned.