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.