Gold drops amid yet another volatility spike, profit-taking

As mentioned last week, this kind of volatility spikes in gold and silver is going to be more commonplace amid the surging run that both precious metals have had and especially as they continue to hang at the highs. For gold though, there is perhaps a short-term double-top pattern that is worth taking notice as it drops by over 2% today to $4,258 currently:

The 100-hour moving average (red line) is a key near-term level to watch as sellers have failed to really secure a break of that since the beginning of the month. That rests around $4,270 currently. And even on a break of that, dip buyers still have room to lean up against the 200-hour moving average (blue line) closer to $4,163 for the time being. So, it’s not to say that a stronger correction is in motion just yet.

That being said, is silver going to lead the way in a push lower in gold this week? We’re starting to see the technical cracks in silver with it breaking below both key hourly moving averages now:

That’s the first time this month that sellers have managed that and a break under $50 does send a message in solidifying their conviction.

There’s no major headlines driving the drop here so profit-taking remains the most plausible reasoning. But if silver is bound for a steeper decline amid the technical break above, it could be one of the not-so-frequent times that it drives a similar move in gold instead of it typically being the other way around.

So, watch out for that. Gold might not be breaking down just yet but silver is already cracking under the selling pressure, and that could spell danger on sentiment in precious metals as a whole.

This article was written by Justin Low at investinglive.com.