Gold, Silver, Oil, Copper, USD: End of the Run or Just the Beginning?
Last Month has been a very good one for the Gold and especially the Silver community, both prices went up nicely. Silver registered its biggest monthly gain since 1987, rising by 27%.
It looks like more and more people are beginning to see the light. Although most of the gains are said to be explained by the recent fall of the dollar, this is not entirely the case. Gold is also rising in other currencies, albeit at a more modest pace. Nonetheless it is rising. The inverse relationship between the Dollar and Gold is still an important factor to keep in mind but we have to look at it with a broader perspective.
More and more institutions and Central Banks have increasingly shown interest in adding Gold to their reserves, not only as a safe haven for the falling greenback but also as a hedge against future inflation expectations. This interest will be a driving force behind the future rise of Gold in all currencies and makes it one of the safest investments for the coming decades.
As far as the "poor man's Gold" (Silver) is concerned, last month has shown the enormous potential that investing in Silver presents versus Gold. While Gold rose by almost 10% last month, Silver added 27 percent. Will Silver keep outperforming Gold? I think so, because Silver doesn't only have a correlation with Gold as a safe haven, it is also used as an industrial commodity.
All charts are courtesy of Stockcharts.com
The outlook for Gold is very promising. The breakout from the flag pattern and the possible reversed Head and Shoulders pattern paint a very rosy picture for the upcoming month.
The "only" hurdle that could spoil this positive outlook is a potential double top around the $1,000 mark. We can expect some resistance at this level because it is the last chance for the bears to launch a significant counter attack, there last line of defense so to speak.
A break to new highs will invite more investors to join the party and will thus trigger a new flow of fresh money to push Gold higher. The technical conditions are all set and ready to go. We are in for an interesting month.
Like Gold, Silver performed very well last month.
The break above the resistance line at $14.50 is a very important move. It signals that a wave 3 (or at least C) is underway with a price target between $17 and $18.
The readings in the chart suggest that this breakout will have some decent follow-through with fresh buy signals in the RSI, DMI (buying power) and the MACD.
The readings from the MACD are an especially good indication that the current weekly trend is very positive. The MACD successfully retested the 0 line and bounced higher, indicating that the long correction from the high at $21 is definitely behind us.
Oil experienced some difficulty breaking through the resistance, now support zone, just below $60. But last week it pushed higher with a 7.5% gain.
The chart is still improving, and if Oil consolidates within the current rise we will witness an important new Long Term buy signal, a positive cross between the 17 and 34 w. MA. The last time this cross occurred (May/June 2007) it signalled the start of a huge rally, from $65 to over $140. If history is any sort of guide, oil could be in for a nice rise.
The conditions in the chart are quite similar to this last positive crossing so let's sit back and see what is in store for us these upcoming months.
Finally the $ chart broke down. As was expected, once the $ fell below the 34 w. MA, the 82 level couldn't act as support and it was all downhill from there. This could just be the beginning of a much bigger fall. Unless the bulls can stop this decline very soon we expect the $ to breach the blue support lines with force.
The chart is turning negative at a rapid pace with sell signals in the RSI, the DMI (Selling power) and the MACD indicators. An upcoming negative crossing of the 17 with the 34 w. MA will add more negative sentiment to the picture. For reference, just look at what happened the last time we got such a crossing in April 2006!!
The positive outlook for Copper remains alive, although it still has some heavy overhanging resistance to take out. The current pattern suggests that a wave 5 is still yet to being. This wave should take Copper to levels above the resistance zone, thus triggering new buy signals.
The technical implications are in favour of such a rise. They are all in perfect positions to support a powerful wave higher.