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Technical Analysis: Has This Gold Pullback Run Its Course?

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The price analysis last month identified the near-term risk that gold could fall below $1880 and even $1850 despite a medium-term bullish outlook. The $1800 level was identified as a key marker for keeping the bull move intact. So far, that has held and produced a solid bounce back towards $1850 which becomes the next hurdle.

While nothing is certain, the miners have indicated that selling may have reached exhaustion. The miners have been leading gold quite reliably in all the major moves so far. Thursday saw a big move in the miners against a falling stock market. It may be one indication, that gold could have turned, but it’s valuable to look at all the indicators to get a full picture…

Resistance and Support


Gold fell through fragile support as the Fed turned up the hawkish talk (but still took no action). The price crashed from $2003 down to $1800 breaking through $1950, $1918, $1880, and $1850 with relative ease. $1800 proved much stronger and has engineered a bounce.

If gold can reclaim $1850 in the coming week and build a base, that would prove bullish. A fall below $1800 could get it trapped back between $1750-$1800 where it meandered for months. If $1750 fails, $1680 is likely to come into play.

This week should give clues to the next short-term move. If next weeks close is over $1850 = Bullish, below $1800 = Bearish, until then…

Outlook: Neutral


Silver got pummeled, falling to its lowest in over a year. It got back above $21 but could not get through $22. With people forecasting a slowing economy and hawkish Fed, silver is getting hit from both sides as it serves both industrial and monetary purposes.

The sell-off has been steep and vicious. Hedge Fund net long positions are the lowest since June of 2019, indicating a very over-sold condition. The monetary aspects of silver should outweigh the industrial uses in the short-term. Thus, silver will probably follow gold. A solid break below $20 could push silver into very bearish territory, but for now, it is tied to gold.

Outlook: Neutral

Figure: 1 Gold and Silver Price Action

Daily Moving Averages (DMA)


The 50 DMA still sits well above the 200 DMA but is clearly moving back down considering the price ($1842) is right at the 200 DMA ($1837). In previous price analysis, it has been highlighted that these 50 DMA turn-backs are common and healthy in bull markets. Luckily, they don’t last too long.

It’s rare to see a strong golden cross invalidated so quickly. This looks more like the summer 2019 retrace, albeit a bit steeper.

Outlook: Bullish

Figure: 2 Gold 50/200 DMA


The silver 50 DMA did not have nearly the convincing breakthrough as the 200 DMA that gold had. Furthermore, the current price sits below both averages. If price does not recover quickly (getting north of $24), then the 50 DMA will dip back below the 200 DMA. That looks very probable based on the current price action.

Outlook: Reluctantly bearish

Figure: 3 Silver 50/200 DMA

Comex Open Interest

The two charts below show the open interest compared to the price of both gold and silver. The overlap is not perfect, but major moves in one generally occur in tandem with the other as speculators push and pull the price around with paper contracts.


Current open interest (542k) is 100k below the recent high of 645k contracts, but also above the ~475k average from the long consolidation period. This indicates that hot money has left but there are still some believers. Furthermore, open interest fell this week even as price rose. There is money on the sidelines ready to come in when the price regains its footing.

Outlook: Bullish

Figure: 4 Gold Price vs Open Interest


Silver open interest tested the pandemic lows near 130k. Despite this, the price remains nearly 100% above those lows ($11 vs $21). This indicates the market is much stronger than it was a few years ago. It also means most of the hot money has been completely washed out. Again, more evidence sits in the COTs report which shows the weakest positioning by managed money in 3 years. When sentiment is this low, price is likely near the bottom.

Outlook: Bullish

Figure: 5 Silver Price vs Open Interest

Margin Rates


Margin rates have stayed flat ever since they were raised to $7200 in the wake of the massive price surge in March. Given the price action, it seems more likely margin would be lowered rather than raised at this point. They may also want to give themselves more ammunition to increase rates if the price jumps again. Lowering rates would be a tailwind.

Outlook: Bullish

Figure: 6 Gold Margin Dollar Rate


Silver fell even as margin rates were being lowered. Rates are now below the levels from June 2020. There is plenty of room to raise rates to counteract any price advance, but there seems little reason to drop rates lower given the market uncertainty.

Outlook: Neutral to Bearish

Figure: 7 Silver Margin Dollar Rate

Gold Miners

Some people are getting rich front running the moves in gold with the miners. The miners led gold up and then led gold back down. The 5% up move on Thursday in the GDX definitely suggests a cohort of traders believe that gold has seen the bottom. It could also be a bounce from extreme oversold conditions.

More than likely, this ratio (blue line below) looks poised to reverse. It’s doubtful that is caused by a further fall in gold prices while the GUI stays flat. A move back higher in the miners will probably be front running a move up in the gold price.

Outlook: Bullish

Figure: 8 HUI to Gold Current Trend

Trade Volume

Love or hate the traders/speculators in the paper futures market, but it’s impossible to ignore their impact on price. The charts below show more activity tends to drive prices higher.

Trade volume collapsed back in early April but has since rebounded. In gold, the rebound looks weak and could be set up for another fall. Silver trade volume has plummeted and looks ready for a rebound. This should pop the price.

Slightly bearish in gold and bullish in silver

Figure: 9 Gold Volume and Open Interest

Figure: 10 Silver Volume and Open Interest


USD and Treasuries

Price action can be driven by activity in the Treasury market or US Dollar exchange rate. A big move up in gold will often occur simultaneously with a move down in US debt rates (a move up in Treasury prices) or a move down in the dollar.

Please note: IEF is the 7-10-year iShares ETF (a move up represents falling rates) and the Dollar return is inverted in this chart to show a positive correlation. They are also plotted on the right y-axis to better show the price movement.

Figure: 11 Price Compare DXY, GLD, 10-year

The first part of April saw a major diversion from trend as gold and the dollar rallied together and bonds fell. This meant gold was an outlier deviating from the other two above (inverse dollar and bonds). This was a bearish sign at the time and proved true as gold reversed.

In the past two weeks, all three have started moving together again. This is a bullish sign. A very bullish sign will be when bonds (orange line) are the outlier trend moving down while the inverse dollar and gold move up. For now, the move is still bullish as all three move together.

Outlook: Bullish

Gold Silver Ratio

Gold and silver are very highly correlated but do not move in perfect lockstep. The Gold/Silver Ratio is used by traders to determine relative value between the two metals. Historically, the ratio averages between 40 and 60, so outside this ban can indicate a coming reversion to the mean.

The recent crash in silver makes it very oversold relative to gold. While this was explained above as the dual nature of silver, it’s rare that a big move like the current one doesn’t reverse.

Outlook: Silver VERY Bullish relative to gold

Figure: 12 Gold Silver Ratio

Bringing it all together

The table below shows a snapshot of the trends that exist in the plots above. It compares current values to one month, one year, and three years ago. It also looks at the 50 and 200-daily moving averages. While DMAs are typically only calculated for prices, the DMA on the other variables can show where the current values stand compared to recent history.

The charts above show that the bearish move may have run its course, setting up for a reversal.

  • The HUI ratio is almost 20% below the same value one month and one year ago
  • Every value sits well below the 50-day values in both gold and silver (except silver Open Interest ratio)
      • This again suggests an extremely oversold market
  • Silver has taken it on the chin over the last month with price down 12%, Open Interest down 11%, and volume down 64%!

Figure: 13 Summary Table

Wrapping up

Last month’s analysis suggested more downside action was probably ahead. Even though gold had fallen from $2000 to $1900 the data showed a higher probability of more downside. Now the data suggests that move may have run its course. Nothing is certain, but the markets have reacted quickly to price in a hawkish Fed.

It all comes down to the Fed. How much more hawkish talk can they administer without actually doing anything before the market stops buying their rhetoric? Furthermore, there are lots of signs the economy is weakening as Mike Maharrey pointed out in his recent podcast.

So what happens over the next couple of months? Maybe inflation dips a little as the economy really starts to falter. Does the Fed use this dip to proclaim victory over inflation even if it is well above 2%? If they do, then they will administer more stimulus. This will be the crossroads for the market. Will they continue believing the Fed or realize how hopelessly dependent the entire economy has become on cheap money? It’s likely the markets will turn before the Fed, and when it does, expect gold and silver to move higher in a hurry.

Data Source: and for DXY index data

Data Updated: Nightly around 11 PM Eastern

Last Updated: May 20, 2022

Gold and Silver interactive charts and graphs can be found on the Exploring Finance dashboard:

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