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Written by Sumit Roy  |

January 04, 2012

Precious Metals Monitor: Gold May Be Establishing Bullish Double Bottom

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Yellow metal’s ability to bounce off key technical support levels could be setting up reliable pricing floor.

It was another volatile week for precious metals as gold and silver fell to six-month and three-month lows, respectively, before quickly bouncing back.

Gold fell as low as $1522.65/oz last Thursday — below September’s $1532 intraday low and support level — but recovered to end the session at $1546. From a technical perspective, because gold was able to salvage the $1532 support level, it avoided a bearish breakdown.

Source: Bloomberg

Prices have since recovered to near $1610 as technical buyers and bargain hunters stepped in amid the successful test of the $1532 level. At the moment, bulls are in control as they try to establish a double bottom on the gold chart. On the upside, a break of the recent $1642 high may be a buy signal, while $1532 is still the level to watch on the downside.

Meanwhile, price action in silver has been even more volatile than that of gold. The metal fell as low as $26.16 last Thursday, just above the September low of $26.07. It has since rebounded strongly above $29.

Source: Bloomberg