It’s been here before.
Last time around, gold found a low and took off higher. Will the support level hold again?
There is no way of knowing for sure, but certain types of price chart analysts are noticing this level and the rather “oversold” level of gold and certain of the precious metals equities.
Let’s take a look at the weekly gold chart that shows the key levels:
You can see how a rally off of the March, 2020 low found enough selling at 165 to take the precious metal back to 157. Then, after quite a rally all the way up to 195, the sellers took it back down again — and once again to the 157 level for 2 significant periods during 2021.
Take a good look at how gold rallied again back up to just below 195 before selling off again, once more down to near the previous level where buyers have shown up in 2020 and 2021. Will they show up again or will that 157 level be taken out and the yellow metal finds new 2-year lows?
We are about to find out.
Silver is already plumbing new depths. It’s not waiting around to see if gold drops below support.
The weekly silver chart looks like this:
You can see how price hit the 20.5 level in mid-2020 and returned to just below that at 20 in late 2021. That previous support has been taken out and dramatically: the price dropped down to just below 17 last week and has recovered somewhat now showing 17.39.
This is a lot of slippage in the precious metals and you have to wonder if it’s gone far enough to be considered “oversold.”
Here’s the weekly chart for a major New York Stock Exchange traded global precious metals operation, Newmont Corporation:
Despite the break of support levels in both the gold and the silver markets, the price of Newmont is holding up well above its previous support spot of 49. It’s managed to remain above it since early 2020 despite the clear retest in gold and the break of support in silver.
Please note, however, how close to significantly oversold is the relative strength indicator (RSI) below the price chart. It’s about to cross the deeply oversold line down there.
This seems to be confirmed by the moving average convergence/divergence line (MACD) just below the RSI chart. It’s as low as it’s been in 4 years, quite a price chart achievement for Newmont.
Does this mean it’s worth buying right now since it’s gotten so oversold according to price levels and their indicators?
Who knows? All you can say is that we’ve reached some kind of extreme in the precious metals arena. Whether the trend downward continues despite the clear oversold indicators remains to be seen, for sure.
Not investment advice. For educational purposes only.