Gold, Silver, Bitcoin: Momentum builds as bulls eye breakouts

Gold hovers near $2720 resistance after breaking above its 50DMA
Silver extends rally, targeting $33.10 as momentum builds
Bitcoin consolidates near $100,000, holding within its uptrend

Overview

Returning US inflation to acceptable levels appears to have stalled, downside labour market risks have receded, yet the Fed has guided markets towards another 25bps cut in December. It’s almost like incoming data doesn’t matter. In China and Europe, further monetary stimulus has been flagged, rolled out to thwart downside risks to activity next year.

With policy settings in the three largest economies moving in the same direction, even before the prospect of additional fiscal stimulus is considered, the potential backdrop of elevated inflation and expanding money supply plays into the hands of those looking for assets to hedge the risk of currency debasement. As such, it comes as no surprise that gold, silver and bitcoin have perked up over the past week.

Gold perks up after extended consolidation

Source: TradingView

Gold has enjoyed a strong rally since Monday after a period of consolidation over the preceding two weeks, with China’s latest stimulus announcement helping to complete a three-candle morning star pattern on the daily timeframe. Since, gold has broken back above the important 50-day moving average, seeing it push up and hold beneath horizontal resistance at $2720, a level the price did plenty of work either side of earlier this year.

What happens next looms as important.

If gold can break and close through $2720, longs could be stablished above with a tight stop beneath for protection targeting a run towards the record highs at $2790. While not a definitive signal at this stage, momentum indicators such as RSI (14) and MACD have turned higher, making the inclination to hold a bullish bias near-term from both a technical and fundamental perspective.

However, if the price cannot break through $2720, the setup could be flipped with shorts initiated below with stop above for protection. Under this scenario, possible targets include $2676.50, 50-day moving average or $2625, the latter a zone that flushed out dip buyers either side of month-end.

Silver squeezing higher

Source: TradingView

The silver stalemate discussed last Friday eventually played out as favoured, with the price breaking above downtrend resistance before eventually running into sellers at $32.18. That’s the first topside level of note for those considering silver setups, with $33.10 and $34.87 the next after that.

With RSI (14) and MACD generating bullish signals on momentum, and the price remaining in an uptrend established on November 28, the near-term bias favours buying dips and topside breaks.

For those considering long setups, support levels to monitor include the 50-day moving average and former downtrend resistance located today around $31.50. If either of those levels were to be broken, the bullish bias would be invalidated.

Bitcoin bulls eye record run

Source: TradingView

After an initial bullish foray above $100,000 earlier this month, bitcoin futures have been consolidating in recent days, resuming its grind higher within the uptrend established in early November. That’s a positive sign for those looking for another potential run higher.

While the divergence between price and RSI (14) persists, warning bullish momentum may be waning, it’s notable RSI (14) has broken the downtrend it was sitting in – perhaps the tide is turning? MACD is trending lower, as yet unable to confirm the potential bullish signal.

Despite the mixed momentum picture, the bias remains to buy dips if the price remains above uptrend support. Today, it’s located around $96,550. A pullback towards the uptrend would allow for longs to be established with a tight stop beneath for protection, targeting a return to the record highs at $103,636.

Alternatively, if the price were to break above the current record , another setup would be to buy with a stop beneath targeting another run higher. Rather than extension targets that some prefer to use, the preference in this setup would be to wait for an obvious topping signal or pattern before considering whether to cut or hold.

If the uptrend were to be broken, the bullish bias would be invalidated, opening the door for bearish setups.

-- Written by David Scutt

Follow David on Twitter @scutty

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