Will gold and silver's consolidation lead to a pullback?

Troy Bombardia
2020-09-18

After a spike in July, precious metals have calmed down and mostly swung sideways. Some bullish traders see this as a consolidation pattern before gold and silver surge to new highs. Perhaps. Or perhaps not. Chart patterns can always be interpreted in 2 ways. (The beauty of charts is that you see what you want to see.)

Regardless, the surge and subsequent flatlining in gold and silver caused their respective Bollinger Bands to widen, and then narrow. Bollinger Bands Width, which looks at the width between upper and lower BB's, jumped and then narrowed significantly.

When this happened in the past, gold had a strong tendency to pullback in the weeks and months ahead:

Here's the same chart for silver:

Silver's returns over the next few months were more bearish than random, but weren't as bearish as gold's returns.

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