Friday 2 November 2012

Metals set for major declines next week

With the main equity indexes seeing early gains vapourising for the fifth time in six days, both equities and commodities saw a major reversal, and closed lower. Both Gold and Silver saw large declines of around 2% and 4% respectively.

GLD, weekly, 2yr

SLV, weekly, 2yr


Gold lost around $35 today, with Silver declining by $1.30. These are both the largest daily closing declines in over a month.

Across the week, Gold lost $33, and Silver $1.13. On a weekly basis, these are the largest weekly declines since mid' June. The metals did indeed open the week higher, but merely formed bear flags, and they were confirmed today.

The outlook for next week is VERY bearish.

The weekly MACD (blue bar histogram) cycle is set to go negative at the Monday open for both Gold and Silver. There will be some considerable downside pressure next week, and very likely, across ALL of November.

First target is GLD 161, although SLV has already broken the initial (and very psychological level) of $30. Indeed, it seems highly likely that 161 will not hold for GLD, and thus the next primary target is around 158.

What will be critical for the Gold bugs to see hold is GLD 155. If we see GLD trading <155 for more than a few days, then much lower levels seem likely, at least 140, if not even into the lowly 120s - in spring 2013.

What about the traditional Santa metal rally?

Those Gold bugs seeking the usual seasonal end-year ramp in precious metals, seem set for major disappointment. The monthly charts are similarly confirming a rollover, and the only issue now is whether the June lows will be taken out.

With the global economy weak, the velocity of money continuing to collapse, it still seems that Mr Deflation is out there...lurking in the shadows. Despite the massive issue about the continued QE of the central banks, for seems deflation is still the more powerful force.

Next week will surely see further declines across the week for both Gold and Silver.