It is still a volatile environment with the heavy selling hitting earlier just now at the tail end of Asia trading. But as we shift to European morning trade, we’re seeing buying appetite return so far on the session. Gold is up over $350 from its lows, cutting losses to “only” 2.6% on the day now. Meanwhile, silver is up around $12 in a modest bounce off its lows – still down 2.3% on the day though.
Well, at least it’s not double-digit percentage declines for silver eh? To put things into perspective, the plunge earlier had silver down roughly 16% at the lows. Ouch.
So, what’s next? Has the volatile and intense selling/correction run its course?
It’s not so simple and straightforward to extrapolate from the “slight” bounce we’re seeing on the session. Again, it would be a fool’s errand to be picking bottoms and trying to catch a falling knife.
So far, the bounce points to a bit of a relief and breather after the sharp one-sided drop in the past two days. Just like how if price moves too far, too fast in any one direction, there’s bound to be a corrective force eventually.
However, whether or not this is the start of a more material rebound remains to be seen. The best we can do now is to dig into the price action and look for clues on that.
And when it comes to sharp rebounds/pullbacks, Fib retracement levels always do well in helping to provide a rough gauge of sentiment.
For gold, we’re seeing price action move back above the 23.6 Fib retracement level of the sharp drop from last week. It’s encouraging but as the technicals show, that is the first step and the bare minimum in trying to muster any potential stronger rebound. The 38.2 Fib retracement level is up next around $4,860 and will provide a better sense of the dip buying momentum if we do get there.
As for silver, we’re seeing price only now come up to start to contest the 23.6 Fib retracement level near $83.20. A push back above $90 is the next step to try and convince that the correction may have run its course.
But otherwise, we’re mostly just seeing a bit of a breather and perhaps some scope for consolidation eventually before any real momentum plays return for precious metals.
This article was written by Justin Low at investinglive.com.