Gold and Silver Gather Strength for Bigger Moves

By: Przemyslaw Radomski, CFA | Tue, Apr 5, 2011
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Based on the April 5th, 2011 Premium Update. Visit our archives for more gold & silver analysis.


 

China Central Bank's recent announcement of a rise in lending and deposit rates caused gold to trade close to US$1,430 on Tuesday, Asian trading time. However, long-term trends in precious metals are UP although the current investor sentiment appears mixed. Weakness of the dollar, the uncertainty in the Middle East and concerns over a looming debt crisis in the euro zone, could support yellow metal.

On the other hand, bears are seen in the market, past few days. What about the sustainability of current short-term downtrends? Today's breakout to new highs in gold appears very bullish at the first sight, but the move has not yet been confirmed.

Well, let's begin today's discussion with reviewing gold and silver market performance. We will start with the long-term gold chart (charts courtesy by http://stockcharts.com.)

$Gold Index

The first and most important point that can be made based on the above chart is that the situation is no longer overbought in the short term. Please take a look at the RSI indicator, which is nowhere near the 70 level (something that would indicate the overbought status). The breakout above the rising long-term resistance/support line has been confirmed.

Until the move above the level of previous highs is confirmed, however, we do not view the situation as one that can be described as bullish enough to justify opening long positions. It simply appears to be mixed at best right now.

$GOLD:UDN

In the non-USD chart, we have seen a move to the rising support line followed by a bounce. Index levels are now equal to where they were several weeks ago. Very little has happened as we have seen a period of consolidation recently.

This could be the silence before storm - markets gather strength for a bigger move. Perhaps we may see a new rally begin quite soon. Overall, the situation is clearly mixed for and Gold Investors should stay alert for new developments on the market, even though gold appears to have started another rally. In most cases, waiting for breakout's confirmation is a profitable idea.

While situation is still rather mixed in the gold market, as the breakout in gold might or might not be confirmed, let's take a look at gold's sister metal - silver.

$SILVER:UDN

From the non-USD perspective, silver was moving in a rather tight trading range in the past week, but it has moved considerable higher since that time.

The situation is somewhat tense, as the previous 'silence before storm' (consolidation) appears to be over. This means that the 'storm' part is upon us, meaning a strong move in either direction. Based on silver's recent performance, it appears that the direction is up.

Still, not everything is bullish for the precious metals market at this point. For instance - silver's seasonal tendencies.

As you might remember from previous essays, this analysis is based on our forthcoming tool - True Seasonals. This tool encompasses both the seasonality of metals and the impact the expiration of derivatives has on metals. As the precision of True Seasonals has proved to be high in March, True Seasonals remain particularly interesting on the brink of the month of April.

Silver Seasonality

Our tool suggests that silver might follow a sideways trend throughout the rest of the April after some well defined fluctuations during the initial days of the month. Quality of Projection suggests that the reliability of the predictions remain high - at no point does it go below 8 (10 is the maximum) and reaches its peak point at the beginning of the predicted sideways trend. This implies that you should include True Seasonals in your analysis of the market and that the prediction of a sideways trend might be especially accurate.

Therefore, based on silvers usual performance in April and how it moves around the expiration dates, it seems that an upward trend might occur in the first days of April after which we should be particularly cautious and look for signals of a possible slump. In the second half of the month prices of silver might drift sideways. So far we've seen a rally, but that is still in tune with True Seasonals.

Summing up, gold has just move to new highs, but this breakout has not been confirmed yet. Silver is the most bullish of the precious metals at this time but since all precious metals move together, we hesitate to call the situation very positive for the white metal, especially that the True Seasonals suggest caution.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us todayand additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

 


 

Przemyslaw Radomski, CFA

Author: Przemyslaw Radomski, CFA

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website - SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR's own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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