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Gold (XAU/USD) and Silver (XAG/USD) retreat pullback continues

By Daniela Hathorn

12:34, 19 April 2023

Bars of gold and silver
Bars of gold and silver - source: getty images

As mentioned last week in my video analysis, Silver (XAG/USD) has staged a pullback from the recent highs as the bullish rally had overheated and become unsustainable. This pullback doesn’t necessarily indicate a change in trading momentum, but rather a period of correction that will likely attract new buyers for the next leg higher.

Silver (XAG/USD) daily chart

Silver (XAG/USD) daily chartPhoto: capital.com. Source: tradingview

The selloff so far has undone about 20% of the March-April rally (19.91 - 26.07) but there is likely further room to go before bullish appetite takes over once again. A key area to focus on will be between 24.53 and 24.12, which acted as a key area of resistance on the way up and has a fair amount of confluence in trading momentum. Beyond there, a move towards 23.60 would likely attract new buyers enough to form a reversal and continue the longer-term bullish trend. This level is also in close proximity to the 38.2% Fibonacci reversal at 23.72. 

Traders should keep a close eye on the US dollar as the greenback has been picking up some momentum after continued hawkish comments from Fed members increase the odds of another rate hike in May. Fears of a recession so far have been helping gold and silver find some safe haven support but the dollar is also likely to influence the sustainability of the bullish rally in precious metals.

Silver

30.94 Price
-1.660% 1D Chg, %
Long position overnight fee -0.0204%
Short position overnight fee 0.0122%
Overnight fee time 21:00 (UTC)
Spread 0.020

Gold

2,416.41 Price
+0.040% 1D Chg, %
Long position overnight fee -0.0191%
Short position overnight fee 0.0109%
Overnight fee time 21:00 (UTC)
Spread 0.30

Natural Gas

2.35 Price
+3.080% 1D Chg, %
Long position overnight fee -0.0162%
Short position overnight fee -0.0057%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Oil - Crude

81.54 Price
-0.510% 1D Chg, %
Long position overnight fee 0.0437%
Short position overnight fee -0.0657%
Overnight fee time 21:00 (UTC)
Spread 0.030

With regards to gold (XAU/USD), the pullback has broken below the ascending trendline that was keeping the precious metal supported over the past month. Unlike with silver, gold has seen more fluctuations in its rally, meaning that there was not a greater need to see a sustained pullback to consider the continuation of the bullish momentum viable. Nonetheless, given the likelihood of continued fundamental support, this retracement will serve to increase appetite for buyers who seek a more profitable entry point. 

I think there is no real risk of a reversal in momentum from here until 1,935, at which point the selloff could drag on further and gather more strength, risking a drop below 1,900.

Gold (XAU/USD) daily chart

Gold (XAU/USD) daily chartPhoto: capital.com. Source: tradingview

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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