Gold and Silver: Positive Divergence

By: Douglas V. Gnazzo | Tue, Jul 25, 2006
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Positive Price Action

Finally today there appeared some positive divergence in the precious metals. Physical gold was down intraday to $602.61 (continuous contract) before rallying up to $615.97 down $6.68 for the day or about -1%.

Silver was down intraday to $10.67 (continuous contract) and rallied into POSITIVE territory closing up 0.06 cents to $10.93 or about .57%. Silver needs to break above its 50 dma at $11.48 before a sustained move up can take hold.

The XAU Gold & Silver Index was down to an intraday low of 130.40 before rallying up into POSITIVE territory closing at 135.66 up +2.22 for the day or about 1.66%.

The HUI mirrored the price action of the XAU hitting an intraday low of 303.04 and then rallying up +6.43 for the day closing at 316.13 (continuous contract) or about 2%.

The stocks outperformed the physical metal today. Physical was down about 1% yet the stocks were up about 2%. One day does not make a trend, but it MAY be the start of a short term bottoming process.

The Three Amigos

There were three (3) positive divergences today.

Also contributing to the somewhat positive change in the precious metals market today was gold moving off its lows substantially higher, although still closing down for the day.

XAU Gold & Silver Index

Work To Be Done

There is still a lot of work to be done, even IF today was the start of a short term bottoming process. An intermediate term rally back up is still a ways off.

There is a fair amount of overhead resistance that needs to be worked off. Further downside price action is a definite possibility until the 50 dma's can be breached and move from resistance levels to support levels.

It appeared that the powers that be knocked gold down enough to cause the intraday low and then the shorts started to cover lifting gold off its lows. It's smells of intervention, but if you know how they play the game you can be on the right side of the trade.

Take what the market gives - don't fight it. However, all of the gold & silver vehicles are below their 50 dma, which must be bettered before any significant even short term rally is likely. Caveat Emptor.

Gold Continuous Contract

Actions

As is our manner of trading we bought two new positions today buying into the early weakness in the pm shares. Since last Thursday we have added three (3) new positions to our Gold Stock Portfolio.

We did not buy with the intention of an immediate rise up - but with the outlook that it was a good area to begin accumulating for the intermediate term move yet to come. There may first be more downside action, however, at this point the risk to reward appears to favor accumulating positions incrementally by buying into weakness.

The HUI needs to close back over its 50 dma at 321.48 for a more sustainable short term move. Likewise, the XAU needs to close above its 50 dma at 138.84. As this is being written gold is up $5.50 overseas. Perhaps tomorrow will bring some positive price action, then again - maybe not.


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Douglas V. Gnazzo

Author: Douglas V. Gnazzo

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

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