Gold Market Update
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Oil is now very close to breaking out from the large Head-and-Shoulders bottom that we had earlier identified, and from the look of the latest oil COT chart, on which the Commercials short positions have shrunk dramatically, it is close to doing so – and if it does it will be on its way to $80 minimum. Needless to say this will be inflationary, and thus bullish for Precious Metals. Should this breakout occur, it will radically improve the outlook for gold and silver.
On the 6-month gold chart we can see that although gold has continued to decline over the past week or so, its rate of descent has slowed, so that a potential bullish Falling Wedge has appeared on the chart. In addition, short-term oscillators, shown at the top and bottom of the chart, are near their normal oversold limits, so there is certainly scope for a rally. Probably what we will now see is a strong rally from here followed by a reaction next month into the seasonal low period, before the advance resumes in earnest.
Finally a “V for Victory” intraday reversal appeared on the gold chart yesterday, providing additional evidence of a turnaround. While too much should not be read into the appearance of this Churchillian indication, viewed in conjunction with other indications it is a positive sign.
Silver Market Update
Clive Maund
While looking weaker than gold at this time, silver is expected to turn up shortly for the same reason as gold - the inflationary implications of an impending sharp rise in the oil price – the expected breakout by oil from its large Head-and-Shoulders bottom formation will project it to a minimum target at $80.
On the 6-month silver chart we can see the potential Head-and-Shoulders top that has formed during this period, that had been identified earlier, but we can also see that, at least on the basis of its recent performance, silver is close to its normal oversold limits, as shown by the oscillators at the top and bottom of the chart, so there is plenty of scope for an advance. Note also how it is at a classic buy spot, being just above its 200-day moving average, the point where it turned around on 2 previous occasions during this period.
Thus, despite the potential Head-and-Shoulders top in silver, and despite it looking weaker than gold at this point, with its downtrend not converging in the same bullish manner as the downtrend in gold, the combination of the powerful bullish influence of a strongly rising oil price and its present oversold condition have created the conditions for a strong rally that is likely to start soon. Probably what we will now see is a strong rally from here followed by a reaction next month into the seasonal low period, before the advance resumes in earnest.
The Commercials short positions in silver fell significantly last week, but were not, as of last Tuesday, at a level thought to be low enough to allow for a big rally. It will therefore be interesting to observe the situation at the end of this week, to see if they raced to the exits early this week as they did with their oil short positions early last week.
Clive Maund, Diploma Technical Analysis
Copiapo, Chile, 23 May 2007
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Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.
Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.
The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.
Visit Clive at his website: CliveMaund.com
