Precious metals got whacked today as the market tries to price in a potential taper from the Federal Reserve. Precious metals have typically been a “dooms day” trade, and the potential budget deal from the US Congress lessens the thick political strife, for now.
Gold broke key resistance at $1,255-58, but price action was rejected at the 4H 200 EMA. Bullish momentum began to decline, and so did gold. Bear momentum, however, increased sharply. The ADX began to tick up, and the -DMI vehemently crossed over.
There are quite a few important moving averages clustered around just above $1,240 per ounce. The 20 EMA is looking to converge into the 50 and 72 EMA, which could signal further downside for gold. Targets of $1,220 and $1,211 are probable. Although, look for a little profit taking as bearish momentum wanes a little and the -DMI to tick downward.
The potential budget deal and taper are a one, two punch to gold. On the other hand, if the budget bill is denied tomorrow, gold could see a pop upwards.
Any pullbacks are likely to be capped around the 50 EMA, or $1,242 per ounce.
Silver was also rejected on the 200 EMA and was followed by a consolidation channel on the 4H chart. Price broke out aggressively to the downside. A 50/72 EMA bullish crossover was rejected, and the 20 EMA is sloping downward. On a 30-day high-to-low Fibonacci retracement, price action was stopped right below the 61.8 percent level, and then it crashed through the 78.6 percent support level. If silver closes below $19.46, the next target is is $19.16 and, potentially, $19.