Precious Metals: Is it Time to Buy?

Posted by Uncommon Wisdom

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Sometimes, when assets are stuck in trading ranges, it creates short-term trading opportunities.

I have been writing lately that precious metals and precious metal companies have been stuck in ranges. This continues to be evident in the SPDR Gold Shares (GLD), iShares Silver Trust (SLV) and Market Vectors Gold Miners ETF (GDX).

But are these ranges to buy … or beware of?

SPDR Gold Shares (GLD)

Below is a chart of GLD:

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Let’s review the chart:

 

  • It’s normal for prices, after a decline, to base (i.e., go sideways) for some time. Basing is considered a consolidation period.
  • The basing started over a year ago.
  • The basing pattern has turned into a neutral symmetrical triangle and participants are buying pullbacks, but selling rallies. A symmetrical triangle is considered a consolidation pattern.
  • Prices did hold the bottom rising trendline and could currently rally to the “declining tops” trendline, the $127.50 area.
  • Once prices reach an apex, they will normally follow the direction of the dominant trend. In this case, the dominant trend is bearish.
  • Eventually, prices will most likely pull back to the $120-to-$115 area.

 

It is not a good time to trade gold. Wait until it pulls back to the $120 area.

The iShares Silver Trust (SLV)

Here is a recent chart for SLV:

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Silver has a bearish descending triangle on its chart, and participants are selling the rallies.

Normally, prices will breach support around the $18 area at some point.

It is best to avoid this type of price action.

Market Vectors Gold Miners ETF (GDX)

Here is a current chart for GDX:

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Let’s review the chart:

 

  • GDX has also been basing for over a year.
  • Resistance is the $28 area. Support is from $21 to $23.
  • It is interesting that prices have not pulled back since the last rally to resistance. This could mean participants don’t want to get out. There is a chance that prices could break above resistance.

 

However …

If gold continues to trade in a range and pulls back to support, will gold take the GDX and other gold miners down with it?

I recommended GDX back in March when prices were closer to support and the risk/reward relationship was better, about 1.5 to 5.

As of right now, however: When in doubt, stay out.

I recommend waiting until prices pull back closer to support before buying GLD, SLV and GDX. This will give you a better risk/reward potential. And if you’d like to receive timely alerts from me when it’s time to buy the metals and/or the miners, complete with detailed trade instructions, you can click this link here >>

Good Gold and Energy Investing,
Dan Hassey