Whilst gold and silver have a relatively close relationship in terms of associated price action, in the last few weeks these relatively close bedfellows have diverged somewhat, with silver continuing the bearish sentiment initiated in mid April, whilst gold pauses and reflects, with neither metal appearing to benefit greatly from recent weakness in the US dollar (UUP, quote).

Silver

For silver, the bearish sentiment is clear from the daily chart, with a consecutive run of ten down days, only punctuated with a minor rally on the 24th of April, before the negative tone was re-established once again, with this morning’s sentiment suggesting another negative day for the metal which is currently trading at $17.18 per ounce at the time of writing. For silver (SLV, quote), several key technical levels have already been breached, as price action moved swiftly through the volume point of control at $18.12 per ounce, before taking out a second key potential support region at $17.42 per ounce and denoted with the red dashed line on the accumulation and distribution indicator.

Indeed this level was retested the following day, and duly held firm, confirming its strength, with the market opening a new week gapped lower at $17.24 per ounce. With little support now below, the next logical pause point is the well defined level at $16.90 per ounce and denoted with the blue dotted line with both the trend line and the trend monitor confirming the current bearish sentiment.

Gold

For gold (GLD, quote), the technical picture is less bearish, with the precious metal finding some strong technical support in the $1265 per ounce area, a region which has been tested repeatedly over the last week, but which to date has held firm, and whilst silver has continued sharply lower, gold has remained range bound. This level of support is now key, but even if this is duly breached, below is the volume point of control in the $1254 per ounce area, which should offer a second line of defence, if the first is indeed breached. For gold of course. much of the recent bearish sentiment was against the relief of the first round of voting in France, and the prospect of a relatively safe majority for Macaron, gold investors duly sold with the precious metal falling on safe haven selling.

Longer term of course, inflation remains the key, and until this driver appears in the horizon, the metal is likely to reflect short term risk sentiment, and fail to develop any longer term trend. In the short term, if the platform of support outlined above fails, then the volume point of control will be duly tested, with further support awaiting in the $1237 per ounce area. So expect further congestion of the metal in the short term, before a possibly rally higher once again in the medium term and back to test the $1300 per ounce area.

Anna Coulling is a trader with over 16 years’ experience and founder of AnnaCoulling.com