Gold and Silver
Update 28th January 2013
1. Personal Note
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Arguments for lower prices:
- Gold continues to be weak short-term, still in downtrend since early October, so far lower highs and lower lows, and a trend in motion stays in motion
- Gold failed again to take out falling 50-MA (US$1,691.97), now looking for support at 200-MA (US$1,663.35)
- Gold overall still trapped in sideways movement (between US$1,525.00 and US$1,795.00) since September 2011
- Latest COT Data for gold & silver not very positive, COT Data for palladium & platinum very negative
- Gold & Silver are not taking advantage of continued Dollar weakness
- Mining Stocks break down through support, HUI index now more than 10% below 200-MA
- Gold Lease Rates went up sharply last week, which might be a sign for another intervention by Central & Bullion Banks
- Large number of February gold calls that need to expire worthless today with strike prices around US$1,680.00 & US$1,675.00
- During this week there will be quite some US bond auctions as well as the FOMC-Meeting. Precious Metals typically act weak during these kind of events
- VIX (Chicago Board Options Exchange Market Volatility Index) at 3-year low. Within the next couple of weeks we should see some form of correction in the stock market which could affect precious metals as well ("Risk-Off"?)
Arguments for higher prices:
- Possible Head & Shoulder Pattern in Gold if 1,635.00US$ is not violated anymore. This would give a potential target around US$1,765.00 if Gold manages to break the downtrend channel and strong resistance at US$1,695.00
- Weekly stochastic has turned up out of oversold condition
- Still MACD Buy Signal on daily chart (although close to abort)
- Support along last summer highs around US$1,625.00-1,640.00 has held so far
- Longer term Gold in similar correction pattern like 2008/2009. Breakout above US$1,920.00 expected to happen in summer 2013
- New all time high for Gold in Japanese Yen (now breakout is being tested...)
- Sentiment continues to be extremely bearish and at levels from which rallies can be expected to start.
- Seasonality until spring quite positive for precious metals sector
- The Platinum-to-Gold Ratio is breaking out to the upside.
- FTSE All World Stock index at highest level since May 2011 (so far "Risk On" continues) & Chinese Stock market in new uptrend
- Never fight the FED. Unlimited QE -> money printing all over the world will push asset prices in all sectors higher...
- Throughout history, periods of massive money creation have always been inflationary and this time should be no different.
- Gold has failed again to take out US$1,695.00. If current downtrend stops around lower daily Bollinger Band (US$1,646.28) a potential Head & Shoulder Pattern could finally end the correction and initiate a new uptrend. But so far price action will need to confirm this possible scenario.
- US$1,696.00 - US$1,704.00 continues to be the line in the sand. If Gold can move above this strong resistance zone the probability for a continuation to US$1,795.00 increases dramatically. This will signal that the 17-month sideways consolidation pattern is about to end soon because bears could not push prices back below to US$1,550.00 - 1,525.00.
- Should Gold break through US$1,635.00-1,625.00 a big wave of panic selling will be triggered and we should see another test of US$1,535.00
- Due to the very negative sentiment and the strong performance of gold in japanese Yen I think strong support around US$1,635.00 - 1,645.00 will hold and Gold can move up again soon. This should open the doors for a surprising move to US$1,800.00 within the next 1-3 months.
- Fundamentally, the FED and all the other central banks continue to hide the true financial situation with massive liquidity injections into the system. The purpose of these asset purchases is a more subtle financing of all the government deficits. In the long run this is highly inflationary. In the short-term this leads to distortion & disconnection in financial markets. Therefore the stock market does not represent the real economy anymore.
- Nothing has changed
- Precious Metals bullmarket continues and is moving step by step closer to the final parabolic phase (could start in 2013 & last for 2-3 years or maybe later)
- Price target DowJones/Gold Ratio ca. 1:1
- Price target Gold/Silver Ratio ca. 10:1
- Fundamentally Gold is still in 2nd phase of this long term bullmarket. 1st stage saw the miners closing their hedgebooks, 2nd stage is continously presenting us news about institutions and central banks buying or repatriating gold. 3rd and finally parabolic stage will bring the distribution to small unexperienced new investors who then will be acting in blind panic.