Metals higher..but fail to clear resistance

Gold and Silver both closed moderately higher, but we saw a very clear reaction at resistance of the declining upper channel/trend. With Gold putting in a black warning/fail candle, it would appear we will see renewed downside into the weekend.


GLD, daily

SLV, daily

Summary

The FOMC announcement earlier certainly did help to give the metals a little kick higher, but it did not last more than an hour..and both metals closed off their highs.


Downside targets

GLD - the big 158 level will be VERY strong resistance, but if the main market does retrace to sp'1460/50..with VIX 17/18...perhaps we'll see GLD 156/54 later next week.

I do not expect a break <154..anytime soon.

SLV, - the 28.50 level will be key...and if we see this fail to hold, then a brief move into the 27s is viable. That sure would give the gold/silver bugs a good scare, and wash out just about all of the weaker (trading) hands.

There is extremely strong rising support for SLV around 27.50/25. I would guess we will not break into the 26s this spring.
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With continued QE - via 40bn MBS and 45bn t-bond buying, there is an awful lot of new 'free money' out there, and it would still seem both equity AND commodity markets will be lifted higher into the spring and early summer.

Gold breaks the bear flag

Whilst the equity indexes climbed yet further, the precious metals were weak at the open, and closed weak. Gold broke below the lower channel of what is likely a bear flag - of a wave'4. Silver is still holding within the flag/channel, but will likely follow Gold in the next few days.


GLD, daily

SLV, daily

Summary

As expected, after a few days stuck just under the 50 day MA, gold saw a marginally significant fall of over 1% today. It has arguably broken a bear flag, and the next downside target zone is the 158 gap..but possibly a move down as low as the lower declining support of 155/54.

*the weekly charts are clearly presenting a large bull flag - from the Sept' highs, with a 5 wave formation within the flag. We appear to now be starting the final fifth wave lower.
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SLV, monthly, bearish outlook

 *chart note. The above is merely one of many scenarios for SLV, and its pointless to guess at this point what the long term target will be. What is clear, is the bull flag - since the Sept' highs.

Whether bullish or bearish about the longer term, if that is a 5 month bull flag..then some serious upside is going to soon occur, after the last 'wash-out' move lower.
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Even the bearish monthly outlook has to acknowledge what is a very clear bull flag, and it points towards SLV in the 38/40 level.

Were SLV to decline to 28/27 across the next 2-3 weeks, a move back to the upper 30s would make for a stunning trade into the late spring/early summer.

*the GLD equivalent for late spring/early summer is around 180/85 - although that is very close to the historic highs. Again, its notable that Silver is still very weak compared to Gold.
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So..bearish near term..but most definitely bullish into mid-2013.

Metals displaying large bullish flags

Both Gold and Silver started this shortened trading week higher. The weekly charts are still displaying pretty clear large bullish flags. If that is the case, we may see a breakout in the next week or so, or put in one final small wave lower, before such a breakout.


GLD, weekly2

SLV, weekly2

Summary

The daily charts (not shown, but see recent posts) still offer the prospect of a final fifth wave lower, but even if the metals do see a little downside, the weekly/monthly charts will remain very bullish into the early summer.

The underlying MACD (green bar histogram) cycle is already ticking higher, and we could see a major snap higher in the very near term.


Prices propped up by the Fed

With QE3 now fully underway, and the 45bn of POMO money likely making its way into the equity - and probably also the commodity markets, higher prices across most asset classes seem more probable than any of the deflationary outlooks out there.

I don't expect new historic highs for the metals this year - not least due to underlying economic weakness, but we could come kinda close, especially for Gold, which is far closer to its high, than the more industrial based - Silver.

Metals holding within bear flags

Gold and Silver opened moderately lower, but saw a very strong reversal in the first hour of trading. Gold turned a $10 drop to a $15 gain by mid afternoon, although around half the gains eroded into a slightly weak closing hour.


GLD, daily

SLV, daily

Summary

Despite the pretty impressive morning reversal, both of the precious metals remain within bear flags..and a final fifth wave lower - as part of a large B wave 'bull flag' seems very likely.

Underlying MACD (blue bar histogram) cycle shows no sign of levelling out yet, but we are getting real high, and a down cycle seems due to begin within the next few trading days.


Major up wave due

What is most important, is that all the price action since the highs from last September is probably a giant bull flag, and if the main equity/commodity markets continue to climb into the spring/early summer, then very significant gains look due for both Gold and Silver.

I don't expect historic highs for Gold or Silver in 2013, but we could easily see Gold around $1800..and Silver testing the big $40.

Minor wave'5 due, before significant move higher?

Gold and Silver could easily be tracing out a 5 wave pattern, as part of a very large multi-month bull flag formation. A final fifth wave to the downside could be imminent, before a much bigger rally, taking GLD and SLV above 175 and 34 respectively.


GLD, daily

SLV, daily

Summary

I've not added it on the daily charts, but you could easily count 4 small waves lower from the highs of last September. A final fifth wave might easily be very minor though, and could even truncate, with a slightly higher low than the fourth.

What is clear, the bigger weekly charts are highly suggestive of what still appears to be a giant bull flag...


GLD, weekly2, rainbow

SLV, weekly2, rainbow

Both Gold and Silver look set for a major move to the upside. I certainly don't expect new historic highs in 2013, but the highs from last September look set to be tested..and probably broken this Spring/early Summer.

Metals holding above the summer lows

The precious metals remain comfortably above their summer 2012 lows. Since Bernanke announced QE3 in September, the metals have (to the surprise of many) declined, but this whole 3-4 month price formation could merely be a giant bull flag.


GLD, weekly2, rainbow

SLV, weekly2, rainbow

Summary

Gold remains stronger than the more volatile - and industrial metal, Silver. It would seem that in any future 'currency worries' moment, the flight to safety will most definitely be to Gold.

The underlying MACD (green bar histogram) weekly cycle looks very much like its levelling out. Although its still very much in negative territory, but we might see the first up tick next week..


Key levels in the mid-term

GLD, >170, and then 175. A break over 175 opens up a challenge of the all time high..and the giant 'Gold $2000' threshold.

SLV, >34, and then 40/42. It would seem very difficult for Silver - unlike Gold, to break to new historic highs this year.
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As ever..physical metals remain the ultimate personal insurance against the printing of the central banks..and indeed..the reckless over-spending policies of most national Govt.

A choppy week to start the year

Despite the indexes seeing a near hyper-ramp to begin the year, the metals failed to participate, and closed the week largely flat. The weekly momentum is still negative, and with the monthly charts similarly still pushing lower, the general pressure remains somewhat to the downside.


GLD, weekly

SLV, weekly

Summary

The week closed with something of a recovery for the metals. With an early Friday drop of $32, Gold managed to close the day down just $7.60, and Silver actually managed to close a touch higher.

The near term trend is still somewhat to the downside, and this is especially the case since the big monthly trend is also pushing down.

The big unknown is whether the summer 2012 lows will be tested..and/or broken.

As was again displayed today, the metals will greatly react to how the US dollar trades. Were we to see a renewed continuation of the dollar - post spring 2011 rally, then the metals will likely break below the summer lows.

Primary target would then be GLD 140/130, with SLV 22/20 The latter of course would assume a particularly weak/deflationary economic outlook, despite an annual 1trn paper printing policy by the Federal Reserve.