I don’t have the time to go into great detail and chart analysis this afternoon but I felt compelled to post about what I see in the gold and silver markets today. I urge you to read my detailed technical analysis from March 27 in which I conveyed the bigger picture for both gold and silver in the intermediate time frame. In that post I attempted to provide both bullish and bearish indicators and levels to watch in order to initiate positions. I presented the following bearish case for gold based on the charts alone:

The bearish head and shoulders pattern on the extreme right still isn’t “dead” and must be respected. Should the price of gold decline again beneath the declining neck line ($1,650) then the chances are that the bearish pattern will want to complete before looking at another upside thrust. Using the same methodology, because the “head” of that pattern was at $1800.00 and the neck line is at $1650.00 a downside move to the $1500.00 range is a probability should the bearish case materialize. Key levels to watch for on the bearish side:

• A significant close below the 200 day moving average may mean the downside correction isn’t over';
  
• A close below $1,650 could accelerate the downside bearish H&S pattern
  
• A bearish pennant in gold (nor marked above to avoid congesting the chart) is still in play with a downside target perilously close to the $1,650.00 number
  

$1,650 is the KEY number on the downside to watch for and $1,710 appears to be the key upside breakout number. My bet right now is still undecided and I would rather wait for further confirmation before placing any additional bets. As you can see though, we are right in the middle of both scenarios that could see a move to $2,000 or a move back down to $1,500

As for silver I wrote:

The potential exists that the bearish head and shoulders pattern on the extreme right of the chart has not completed. If this is so, silver could see a move down to $31.09 again which would put the bear pennant in play that we spotted last week. That line also coincides with the descending neckline on the zoomed in chart above. If $31.09 doesn’t hold, silver could very well be on its way down, hard and fast, as the pattern looks to complete. The potential stopping point for the extreme move could be $25.00 if we use the last high of $37.58 and the declining neckline point of $31.00. Remember too that in the extreme bearish scenario, we could see the price test the lower line of the downtrend channel that traverses off the chart at approximately $22.00.

As recently as April 25th I suggested that because silver had breached the level I said would spell trouble, that this painted a very bearish outlook for silver going forward. I am hereby reiterating that statement. Bot don’t despair, I do think that the metals are approaching what might be their bottom soon at which time we should see the resumption of the upside move. I remain firm in my conviction that we haven't seen the last of Central Bank stimulus however the fact that this option seems less likely at present is what is driving both gold and silver down. When we start to get wind of the potential for more Fed action, I believe that is when the metals will turn. Remember as I have stated repeatedly, one of the main drivers of the metals over the last 3-4 years has been the massive liquidity pumped into the system by the Federal Reserve. We knew the day would come when the spigots would be turned off and that day was going to spell trouble for assets that rose as a result, gold and silver included.

That’s my take. On a technical basis, we have breached levels that I indicated we needed to hold to maintain the potential for upward movement. As such, the charts are clearly bearish.

Fundamentally, the need for more Federal Reserve easing is off the table FOR NOW so gold and silver aren’t going to take any wind in their sails from this potential market mover. Furthermore, geopolitical tensions have eased somewhat and more importantly, for now, it appears as though we are the potential cusp of a financial disaster in Europe which means that forced liquidation and capital raises by selling some of the better performing assets may keep pressure on the metals for a while yet. Rohit Savant, an analyst with CPM Group in New York agrees, telling Martketwatch;

“Jobless claims are down, which is a good thing,…But gold investors tend to correlate that with potential for quantitative easing ... and that probability is reduced (after the report), which is bearish for gold.”

If you are like me, and that is, waiting to purchase more gold or silver, perhaps you should hold off for a bit as I think you may be able to buy it for a little less in the coming days or weeks. If you must purchase, scale into your purchases, not buying it all at once. As I have stated, I have cash set aside to buy bullion for longer term reasons but I still haven’t placed my orders yet because I don’t think the selling is over. Keep in mind that both metals have been making a series of lower highs and lower lows which generally implies that the downtrend is still in tact.