Gold Market Update
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In the last update posted on the 17th it was predicted that gold would stage a rally to alleviate the oversold condition that existed at that time, and that this rally would take it about $595 before it reacted back again. Today gold attained $594.15 intraday. However, this rally was expected to occur against the backdrop of a rally in commodities generally, which has not occurred but now looks set to occur. If it does gold is well placed here to rapidly gain traction in coming days, and the strong performance by gold stocks today points to a stronger advance in gold in the near future. Nevertheless, the risk of it suddenly going into reverse again if commodities generally do not rally as expected should not be discounted.
On the 6-month chart we can see the potential small base that has formed just beneath the 200-day moving average. We had earlier expected this, but also expected it to go into renewed decline from here, despite the MACD indicator shown at the bottom of the chart having risen up through its moving average, and the MACD histogram having moved up above the zero line, developments that frequently precede a stronger rally. However, if we now look at the 6-month chart for the Commodities index we see that Commodities have still not recovered at all from their deeply oversold position, but yet are looking increasingly likely to stage a significant relief rally soon, as the MACD is very close to rising up through it moving average from a very low level and the MACD histogram is moving up towards the zero line.
It is thus clear that if we see a significant snapback rally by commodities generally, gold is well placed to break above the resistance at $600 and stage a significant rally from here. As described in the Big Picture article, however, we should not lose sight of the fact that commodities have suffered a major breakdown, and after a relief rally are likely to go into renewed decline. This should be kept in mind by traders who are long gold going forward.
Silver Market Update
Clive Maund
In the last update posted on the 17th it was predicted that silver would stage a rally to alleviate the oversold condition that existed at that time, and that this rally would take it about $11.60 before it reacted back again. Today silver attained $11.49 intraday. However, this rally was expected to occur against the backdrop of a rally in commodities generally, which has not occurred but now looks set to occur. If it does silver is well placed here to rapidly gain traction in coming days, and the strong performance by Precious Metals stocks today points to a stronger advance in silver in the near future. Nevertheless, the risk of it suddenly going into reverse again if commodities generally do not rally as expected should not be discounted.
On the 6-month chart we can see the potential small base that has formed in the vicinity of the 200-day moving average. We had earlier expected this, but also expected it to go into renewed decline from here, despite the MACD indicator shown at the bottom of the chart having risen up to its moving average, and the MACD histogram having moved up to the zero line, developments that frequently precede a stronger rally. However, if we now look at the 6-month chart for the Commodities index we see that Commodities have still not recovered at all from their deeply oversold position, but yet are looking increasingly likely to stage a significant relief rally soon, as the MACD is very close to rising up through it moving average from a very low level and the MACD histogram is moving up towards the zero line.
It is thus clear that if we see a significant snapback rally by commodities generally, silver is well placed to break above the resistance at $11.75 and stage a significant rally from here. As described in the Big Picture article, however, we should not lose sight of the fact that commodities have suffered a major breakdown, and after a relief rally are likely to go into renewed decline. This should be kept in mind by traders who are long silver going forward.
Most of what is written above is a carbon copy of what has been written for gold, adapted for silver, because the patterns that have formed in both metals in recent weeks are almost identical, and the same arguments apply to them both at this time.
Clive Maund, Diploma Technical Analysis
Kaufbeuren, Germany, 27 September 2006
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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
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