For all of the recent weakness across the commodities complex, including precious metals, gold has hung in there pretty well. After putting in an intermediate low of $1,180/oz in June 2013 (not shown above), it was touched again in December of the same year. After each test of this level, gold rallied sharply in the following weeks. Even as it has gone straight down since July, it's still well above $1,180. In fact, its MACD and RSI have both turned the corner suggesting near term strength - if nothing more than to work off oversold levels. Yesterday's action was also encouraging in that gold put in a nice hammer pattern, meaning that it closed near the top of its daily trading range after early weakness. This suggests buyers are stepping in at these low levels. For now, it's a game of wait and see as price remains mired in a 2 year trading range.
Silver, on the other hand, has shown extreme weakness since July. Unfortunately for the bulls, it recently broke below its $18.17 low from July 2013 and has continued falling since. This was an obvious technical level of support that no doubt many traders had used as a stop loss level. I would look for continued weakness here, possibly down into the $15s. We will likely see a relief rally back up to that green line of resistance (formerly support) before falling again. This would be to work off the extreme oversold condition in relative strength (top panel). Look for a close above $18.17 before any longer-term rallies can be considered.
Lastly, I wanted to take a quick look at the Gold-Silver Ratio (GSR) since silver has been so weak relative to gold lately. When silver broke down last Friday without a corresponding move in gold, the GSR spiked to multi-year highs. Today, we're sitting a hair below 70, the highest level since 2010. From purely a technical standpoint, this chart is incredibly bullish. After peaking in mid-2013, the GSR consolidated sideways for over a year, and now it has demonstrably broken up and out of the consolidation range. It appears that this chart wants to go higher which means one of two things. If gold continues to fall, silver will fall faster OR if gold begins to rise, silver will either rise slower or continue to fall. Either way, this chart suggests silver will underperform gold for the near future. One argument against this, however, is that the GSR RSI is so extremely overbought. In any event, we've seen a bullish breakout in the GSR which further confirms that silver knife-catching is ill-advised at the moment.