Friday marked a very strong sell-off after a supposedly very quiet week. The electronic auction-based trading replaced the silver fixing. The system run by CME Group and Thomson Reuters in partnership with the London Bullion Market Association (LBMA) seeks to make the trade process more transparent. At the end of the first day, Bloomberg reported 525,000 ounces offered and 325,000 ounces were sought.
Back to a price action approach, XAGUSD, which shares a similar performance with .Silver, broke below the 61.8 Fibonacci level. This level does not seem to hold based on the massive sell off causing a strong cross below this price level. Nevertheless, this pair is still right on schedule making it’s way to the first support zone where it is likely a reversal will be seen. The only concern is the most recent test of this zone in late May, 2014 when the price managed to surpass this zone before reversing signaling a weakening. While waiting for a long entry, it may be a good idea to sell gold.
Historical gold and silver performances showed that silver tends to be leading gold. This recent fall in silver will most likely cause a similar reaction with gold. Neither metal is looking too optimistic at the moment so why not take the other side? XAUUSD didn’t experience nearly as significant of a drop, which is expected to continue when markets open next week. Not much difference for .Gold traders, just a 57 cent difference in price.
