One Step Back, Two Steps Forward

SILVER PRICE

Silver continues to just go sideways. Capped by key resistance at $23.50 and the 200-day moving average. Support is at the double bottom at ~$20.

The RSI is neutral, but the MACDs are trending up.

Looking at a shorter timeframe, such as the four-hour chart, we can identify some key parameters:

A break of the downward sloping trendline at ~$22.80 would be the initial signal that the bottom is in. Confirmation comes with a break and close above key resistance at $23.50.

Support is at $22.40-$22.50, which also happens to be the 61.8% Fibonacci retracement. But the line in the sand on the bottom is the double bottom at ~$22.

Simply put, break $23.50 and $25 is next. Break $22 and we get our final lower low.

GOLD PRICE

It looks like Gold has bottomed at ~$2000 and is slowly making its way higher. If so, the next target on the upside is $2200, but we need to close above $2090 and break $2100 first.

By contrast, a break of $2000 would open up a move down to the 200-day moving average or lower.

The RSI and both MACDs are basically neutral.

10-Year Yield (“10YY”)

The correlation coefficient between the 10YY and Gold is currently at -0.6. This means that Gold moves inversely to the 10YY. While it is not a perfect correlation, the 10YY still has a significant influence on Gold, and by derivation, Silver too.

There are two primary scenarios here.

1. The bigger picture W-X-Y suggests a move up to ~4.50% next, then down it goes to 3.30-3.40%.

4.54% also just happens to be the standard 61.8% Fibonacci retracement of the fall in the 10YY from 5% to 3.79%.

The move up to X at ~4.50% would put pressure on the metals to go lower. But the drop in yield to ‘Y’ thereafter would drive Gold and Silver much higher. We would see a new record high in Gold.

2. The alternative A-B-C scenario is very similar to #1 except the peak in B is already in place at 4.35% and heading lower now.
   

This would signal that the lows are already in place in Gold and Silver and the metals are heading higher from here.

The deciding metric as to which is playing out is 4.19%, imho. If we break below there, scenario #2 is under way and up go the metals.

If 4.19% holds, scenario #1 is in play and lower lows are ahead for the metals. A break above the prior of 4.35% would confirm it.

Of course, this assumes that the correlation between the 10YY and the metals holds.

Taking a huge step back to see the big picture, the message is that Gold and Silver are going higher in either scenario. Again, it’s just a case of different routes but the same destination: Higher!