Silver leads the breakout for gold, but resistance looms

Soft US retail sales data has rekindled hopes that the Fed may have more leeway to cut rates sooner than they're letting on. This has provided a nice bounce for metals in Thursday's Asian session, with many now waiting to see if momentum can be sustained when US traders return to their desks after the mid-week public holiday.

Silver is up 2.3% and at a nine-day high after breaking back above $30 near the end of the session. After a bit of a delay, gold is now catching a bid and is up 0.6% ahead of the European open. Copper is also up 0.5%, although it has pulled back after rising 1.7% earlier in the session.

Given we're hours away from two central bank meetings, sentiment can easily shift. If metals are rising on dovish expectations for the Fed, they could potentially give back some of those gains if the BOE (Bank of England) or SNB (Swiss National Bank) are not as dovish as hoped. And I suspect they may not be.

Yes, headline inflation in the UK slowed to 2%. But that may not be enough to warrant a clearly dovish tone from the BOE today. As stated previously, I doubt the SNB will cut rates today, given their inflation warning stemming from a weak currency, higher growth, and a slowed decline in CPI figures. Besides, silver—the leader of the pack—is fast approaching resistance.

Silver technical analysis

The day's current high has stalled around trend resistance. This is a bullish breakout from the consolidation around the 50-day EMA, so overall it appears constructive for further gains if or when resistance is cleared. The 1-hour chart also shows that the daily high lands around a high-volume node (HVN) from the prior retracement, which adds weight to the case for an interim top. Lastly, the daily RSI (2) is now within overbought territory, along with the 4-hour RSI (2) and RSI (14).

Should prices retrace, bulls could reconsider longs around $30 or the monthly pivot point just above $29.50.

Gold technical analysis:

In the hours before silver broke out, I was looking at gold, thinking it looked like it wanted to break higher—and if it did, it was not a breakout to be trusted. The price action of the last couple of hours has done little to sway this opinion

Gold's breakout is lackluster in comparison, meaning bulls are driving prices higher with less conviction. With the monthly pivot point just above $2,350, any move towards this level could attract bears seeking to fade the upward momentum.

Recall that silver broke out during the Asian session with no apparent news and thin volumes. As silver led gold's rise and is now facing resistance, while gold struggled to climb today, a downward move in silver suggests a similar move for the underperforming gold.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge