Can The Recent Moves In Gold And Silver Really Be Called A Rally?

By: Przemyslaw Radomski, CFA | Fri, Jul 27, 2012
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Based on the July 27th, 2012 Premium Update. Visit our archives for more gold & silver analysis.


 

Gold rose sharply Wednesday after a European Central Bank council member suggested the possibility that Europe's rescue fund could get a banking license, allowing it to tap cheap ECB funding. The rally was also supported by reports that the Federal Reserve is getting ready to implement another round of stimulus. The Wall Street Journal reported Wednesday that the Fed is growing uneasy over the sluggishness of the U.S. economy and the unemployment rate. Gold market showed some strength this week but is this really a beginning of a new rally?

Let's have a look at gold's chart right away and try to figure out whether these recent moves have much meaning for the upcoming weeks (charts courtesy by http://stockcharts.com.)

Chart 1

In the very long-term chart of the yellow metal (if you are reading this essay on sunshineprofits.com, you may click the above chart to enlarge), the situation is unchanged in spite of the rally this week. The trend still remains down from here and with RSI levels now close to 50, gold is no longer oversold.

When it comes to gold's short-term performance, we need to mention that the short-term resistance line has not yet been crossed and it is quite hard to tell whether this will happen based on gold price alone. Such an event would influence the short-term outlook significantly - a breakout would likely be followed by a significant rally, but since it was not yet seen, the implications are not bullish.

Now, let's have a look at the white metal's chart as it also seems to have experienced a rally.

chart 2

While the rally was seen if one monitors the precious metals market on a daily basis, the very long-term chart for silver (if you are reading this essay on sunshineprofits.com, you may click the above chart to enlarge) reveals that this week's rally is basically invisible. Silver saw a small move to the upside, which was stopped by the 50-day moving average. There was no breakout above this line.

And what about the short term? The inverted cup-and-handle pattern is still in place and still has bearish implications. This 50-day MA provided resistance during the pullback back in 2008 and may play an important role this time as well.

Finally, let's take a look if one of our own indicators suggests that a bigger rally is in the cards.

SP Gold Stock Bottom Indicator

As you may see above, the indicator touched the lower dashed line, which is a buy signal. However, it was very close to this level just a few weeks ago and only a small rally followed. So, a small move to the upside was very much in the cards, but this is not enough to claim that a reversal in the trend will be seen.

Summing up, the recent moves in precious metals are more of a pullback than a real rally. They could turn into a rally if something (like a rally in oil or breakdown in the USD Index) pushes them higher and they break above their respective resistance levels, but this remains to be seen. We encourage you to join our subscribers, who have already read today's Premium Update that deals directly with factors that could impact the situation for silver, gold, and mining stocks (with emphasis on the USD Index).

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 today and 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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