About Yesterday's Gold & Silver Pullback...

By Jesse Colombo

Just days before the high-stakes U.S. presidential election, asset prices—from stocks to commodities—dipped amid heightened market volatility.

In any strong bull market, like the one we’re seeing in gold and silver, regular pullbacks are to be expected—some even sharp, intended to shake out “weak hands” or retail investors prone to panic. 

Seasoned investors and traders, however, stay composed, following their game plan without letting emotions drive their decisions. In this update, I’ll show you where gold and silver stand following yesterday’s pullback.

After a steady, nearly drama-free rise, gold pulled back by 1.56% today. On Tuesday, it broke out of a bull flag pattern but has since returned to the breakout level. 

This pullback appears to be a simple backtest, keeping the breakout intact. 

I monitor $100 increments in COMEX gold futures, as these levels frequently act as support and resistance. On Wednesday and Thursday, COMEX gold futures faced resistance near $2,800, similar to its behavior around the $2,700 level a few weeks prior. 

Currently, prices are oscillating between $2,700 and $2,800, with a decisive close above $2,800 needed to confirm the next bullish signal.

As I’ve explained recently, silver remains in a bull flag pattern that is still valid despite today’s 3.3% decline. On Friday, October 18th, silver achieved a critical technical breakout, which remains intact as long as it holds above the key $32-$33 support zone. 

Following strong breakouts, it’s common for an asset to backtest the breakout level. A rebound from this support zone and a breakout from the bull flag would signal the start of the next leg in the rally.

While some investors and traders may feel uneasy after today’s pullback in silver, it’s essential to remember that these dips have occurred regularly since silver’s rally began in August. There’s no reason to believe this pullback is any different. 

Remember, an uptrend is characterized by “higher highs and higher lows”—exactly the pattern we’re seeing in silver. This confirms that silver is in an established uptrend, with momentum continuing to favor the upside.

I often show the Synthetic Silver Price Index (SSPI), a custom indicator I developed to help validate silver’s price movements. The SSPI averages gold and copper prices, adjusting copper by a factor of 540 to prevent gold’s higher price from disproportionately influencing the index. Interestingly, the SSPI closely mirrors silver’s price despite silver not being an input. 

I’m watching for a decisive close above the SSPI’s key resistance range, between 2,560 and 2,640, to generate an additional bullish confirmation signal for silver.

While silver had a breakout on October 18th, the SSPI has yet to follow suit, meaning it hasn’t confirmed silver’s breakout. 

I believe this is a significant reason why silver hasn’t achieved escape velocity yet—it’s like an 8-cylinder engine firing on only six cylinders. I remain optimistic that this indicator will soon break out, however, providing silver with a much-needed boost.

I monitor silver mining stocks, particularly the popular Global X Silver Miners ETF (SIL), to validate movements in silver prices. On October 18th, SIL surged above the $36-$38 zone and has since back-tested it. The breakout remains valid as long as SIL holds above this zone. 

Such backtests are common in financial markets, often orchestrated to shake out “weak hands” and allow professional investors to accumulate more before the asset moves higher.

I also monitor the Amplify Junior Silver Miners ETF (symbol: SILJ), which is the main proxy for junior silver mining shares. 

On October 18th, SILJ closed above the $13-$14 zone and has since back-tested it. The breakout remains valid as long as SILJ holds above this zone.

In conclusion, yesterday’s pullback in gold, silver, and related assets reflects the natural ebb and flow within a bull market, underscoring the importance of staying grounded during volatile periods. 

Gold’s return to a key breakout level suggests a routine backtest, while silver remains within a bullish pattern, supported by the October 18th breakout. I’m still closely watching for a breakout in the Synthetic Silver Price Index to confirm that silver is poised to reach escape velocity.

As we head into a period of heightened market uncertainty, these assets maintain solid technical foundations, presenting attractive prospects for investors with a steady, long-term outlook.

Published on Money Metals Exchange.