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.