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Gold and Silver

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Published : May 24th, 2013
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Category : Technical Analysis

24hGold - Gold and Silver

24hGold - Gold and Silver


Arguments for lower prices:

  • In April gold finally broke down from huge descending triangle and out of 2 year sideways zone. The old support between US$1,520.00 and US$1,540.00 now is massive resistance. It will take more time to regain this level.

  • Still valid MACD sell signal on monthly chart

  • Gold still in well defined downtrend

  • If gold falls below monday´s low around US$1,340.00 we should see a test of US1,320.00 followed by a break of the multiyear uptrend. Already hourly close below US$1,359.00 would be critical.


Arguments for higher prices:

  • Last three trading days have been extremely volatile with huge moves to both sides incl. shortsqueezes and reversals.... But so far US$1,340.00 has not been violated. Gold is producing first series of higher lows and higher highs.....

  • Potential W-formation shapping in gold. Confirmed if gold closes above US$1,480.00.

  • New low in HUI Goldmining-Index has not been confirmed by various indicators (positive divergence).

  • CoT Data for gold and silver extremely positive: Commercial Short Position at low levels last seen during deflationary crash in 2008. Small speculators are net short on gold for the first time. CoT-Data for Platin are neutral while for palladium they remain negative.

  • Sentiment continues to be at oversold extremes (Gold Public Opinion & Hulbert Gold still at multiyear lows, Central Fund of Canada trading below net asset value). A contrarian buy.

  • Gold demand from china during 1st quarter 2013 is up 20% compared to last year

  • Physical gold market seems to be detached from paper speculation. ETF sales responsible for falling goldprice while worldwide physical market is strong.

  • Japan potentially very very dangerous for world markets. The yield on 10-year japanese treasures is exploding. Huge derivates market could be on the verge of blowing up and might affect equities everywhere. The moneyprinting in japan is a lot of fun in the shortterm but when it stops working it will create a disaster… This morning Nikkei was down 2000 points (ca.12.5%) from yesterday´s high!!!!

  • QE in US does not solve any problems. Right now there is a lot of speculation in the stockmarket. The S&P 500 is trading near a 52-week high and over 90% of its components are above their 200-day moving average. This shows a high degree of participation and points out to euphoria. The Hulbert Stock Sentiment is clearly at an extreme suggesting that a substantial correction is looming. On top we are entering a seasonal cycle which typically brings corrections and/or consolidations (sell in may).

  • The Fed itself has become the greatest source of market instability and volatility

  • Escalation in Syria/Israel. Situation in middle east could easily explode.

  • According to Mohamed A. El-Erian from Pimpco, the world is engaged in four historic and unprecedented policy experiments:

    1. China, where the new leadership is managing a shift from an increasingly less-potent mercantilist growth model to one based on internal demand, while seeking to deliver it while maintaining high growth rates;
    2. Europe, where governments (with the help of the European Central Bank) are trying to complete an imperfect economic union in the midst of a recession, alarmingly high unemployment (especially among the young), analytical disagreements and political tensions;
    3. Japan, where the new government of Prime Minister Abe has embarked on the country's boldest post-war economic experiment, deploying the "three arrows" of highly unconventional monetary policy, aggressive fiscal expansion and (still to come) fundamental structural reforms; and
    4. The United States, where the Federal Reserve is trying to deliver growth and jobs using partial and imperfect measures, and doing so without the proper support of other policy agencies that are paralyzed by Congressional dysfunction.


Conclusion

  • Instead of challenging the broken support around US$1,525.00 gold sold off during the last two weeks. After 7 consecutive days of falling prices gold reached a shortterm bottom monday morning in asian trading session at US$1,340.00. From here gold exploded higher but so far could not hold above US$1,400.00. I interprete the extremly high volatility as a sign that gold is bottoming out.

  • At the same time it looks like stockmarket correction finally has started. This means "risk off" for stocks and could lead to a flight into safe haven gold.

  • If gold can close above US$1,400.00 we would have a first positive signal that this multi-month correction is over. This would open the door for a rally up to US$1,440.00 and US$1,485.00. Even US$1,525.00 is possible within the next two months.


Longterm:

  • Nothing has changed

  • Precious Metals bullmarket continues and is moving step by step closer to the final parabolic phase (could start in autumn 2013 & last for 2-3 years or maybe later)

  • Price target DowJones/Gold Ratio ca. 1:1

  • Price target Gold/Silver Ratio ca. 10:1

  • Fundamentally, Gold is still in 2nd phase of this long term bullmarket. 1st stage saw the miners closing their hedgebooks, 2nd stage is continously presenting us news about institutions and central banks buying or repatriating gold. 3rd and finally parabolic stage will bring the distribution to small unexperienced new investors who then will be acting in blind panic.

Companies Mentionned : Central Fund Of Canada | Metals X | Signal | Triangle |
Data and Statistics for these countries : Canada | China | Israel | Japan | Syria | All
Gold and Silver Prices for these countries : Canada | China | Israel | Japan | Syria | All
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Florian Grummes is studying and trading the Gold market since 2003. Parallel to his trading business he is also a very creative & successful composer, songwriter and music producer.
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