Gold & Precious Metals
In our previous commentary we discussed the implications that the most recent moves in the USD Index and the general stock market are likely to have on the precious metals market. Today, we will briefly discuss two parts of the PM market: silver and mining stocks (precisely: SLV and GDX ETFs). We summarized the previous essay in the following way:
(…) the impact that the USD Index and the general stock markets are likely to have on the precious metals market is weak and bullish on a short-term basis, but more meaningful and bearish in the medium term.
Since that essay was posted, we have seen a small move higher, which was in perfect tune with the above. Now, however, it seems that it is the medium-term decline that we should focus on as the resistance levels have already been reached in case of silver and mining stocks. That‘s the case with gold as well.
Let’s take a look at the SLV ETF chart (charts courtesy of http://stockcharts.com.
Looking at the above chart we see that the SLV ETF moved above the 50-day moving average and reached the medium-term declining resistance line (based on daily closing prices – February and August highs) in the previous week.
Although silver closed the week slightly above its 50-day moving average, which is a bullish sign, we didn’t see a breakout above the medium-term declining resistance line in the following days. On top of that, we saw a move lower after silver reached it.
From this point of view, it seems that further increases will likely be limited, especially when we take into account the fact that silver’s cyclical turning point is just around the corner. Therefore, it’s quite possible that we will see its impact on silver in the coming days. This can lead to a pause or even stop further increases.
Can we see a confirmation of the above in the chart featuring mining stocks? Let’s have a look at the whole senior mining stocks sector with Market Vectors Gold Miners ETF as a proxy.
On a short-term basis, we have seen strong performance since mid-October. Additionally, in the previous week the GDX ETF broke above the declining resistance line and continued its rally in the following days. In this way, yesterday, it reached a resistance line – the neck level of the previously completed head and shoulders pattern. The 50-day moving average was not successfully broken and the temporary move above the 38.2% Fibonacci retracement level was invalidated. The latter provides us with bearish implications for the short term. In other words, it looks like the rally that was likely to happen, is already behind us or quite close to being over (we wouldn’t rule out another move to the „neck“ level, but we don’t think that we will see a confirmed breakout above it).
Summing up, although we‘ve seen an upward move in silver in recent days, it hasn’t changed much from the medium-term perspective. When we factor in the impact of the USD Index and general stock market that we discussed in the previous essay, silver‘s cyclical turning point, which is just around the corner, and the fact that the short-term resistance lines have already been reached in case of the GDX ETF, we can presume that the top of the recent upward move in the precious metals may be already in (or is very close to being in). In fact, we have suggested closing speculative long positions in yesterday’s Market Alert.
Thank you for reading.
Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold Price Prediction Website – SunshineProfits.com
METALS: GOLD, SILVER, PLATINUM, PALLADIUM AND COPPER – 1252.69 HELD AND GOLD HAS PUSHED HIGHER TOUCHING 1361.98 on Monday. Gains are coming grudgingly. I NOW WANT TO SEE GOLD TAKE 1374.77 TO HELP RECONFIRM THE OCTOBER ‘CYCLICAL LOW’ THAT IS BEHIND US. IF WE SHOULD PULL BACK HERE, WE DO NOT WANT TO SEE A DECLINE UNDER 1287.00 AND CERTAINLY NOW 1252.69 – MAJOR SUPPORT LEVELS. I’M GIVING THE UPSIDE THE BENEFIT OF THE DOUBT DUE TO RECENT POSITIVE LEIBOVIT VRs AND POSITIVE SEASONAL PATTERNS.
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Spot Gold was up 1.35 at 1357.85 touching 1361.98 intraday. On October 15, it traded at 1252.69. As I’ve written, it appears that was the anticipated October ‘seasonal’ low. However, should we break under 1252.80, the June 28 low of 1186.40 may indeed be challenged. Next resistance is 1374.77 and ultimately the August 28 peak at 1432.38 before we can even attempt to call a major bottom.
Seventeen analysts surveyed by Bloomberg News expect prices to advance next week, nine are bearish and six neutral. The Bloomberg U.S. Dollar Index, a measure against 10 currencies, slid to an eight-month low this week as U.S. employers added fewer jobs than expected last month. Gold’s 30-week correlation coefficient to the index is at minus 0.53, with a figure of minus 1 meaning the two always move in opposite directions.
A majority of participants in the weekly Kitco News Gold Survey expect to see higher prices next week, with many expecting the gains established this week to spill over into next week’s dealings. In the Kitco News Gold Survey, out of 34 participants, 26 responded this week. Of these, 20 see prices up, while five see prices down and one sees prices sideways. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. Last week, a nominal number of survey participants were bullish. As of noon EDT Friday, December gold on the Comex division of the New York Mercantile Exchange was up about $32 an ounce for the week.
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Spot Silver was down .09 at 22.62. Silver touched 22.87 on Thursday, after touching 22.01 on October 22 where a key reversal reversed the short-term trend higher. We NEED to see some upside momentum here and, so far, it’s lacking. The big low was formed on June 27 at 18.31. We then rallied to 25.07 on August 28. From there we declined to 22.01 on October 22 which could be considered by some as a retest of the 18.31 low. We shall see. Downside risk is into the 13.00-15.00 range if that low is violated.
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Platinum was up 17.50 at 1475.00, closing at the high for the second day in a row. The recent high was 1550.50 posted on August 27 and the October 15 low was at 1360.00. Stepping back, the recent intermediate high was 1745.00 from February 7 and the recent intermediate low was 1303.00 from June 28. The big, big low was at 731 on October 27, 2008 and the big, big record high of 2308.80 that preceded it was back on March 4, 2008.
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Palladium was up 2.00 at 748.50. On October 22, Palladium touched 754.50. We need to see that level penetrated to reinstate the short-term uptrend. On June 10, we touched a new recovery high of 775 before we nosedived to 633 (the June 26 low). That pretty much defines the current near-term trading range. Under 633, downside potential is next to 526. Above 775, look towards the 825-875 range. A little history: The big, big low was posted back on November 28, 2008 at 154 and Palladium subsequently traded at 862 on February 18, 2011. Looking way back, however, Palladium hit an all-time high of 968.00 back in December, 2000. As you know, Palladium’s fortune as is with Platinum (and Rhodium) are somewhat tied to the economy and the automobile industry.
Platinum and palladium will be the best performing precious metals next year as record global car sales will keep them in short supply for a third year, according to the most-accurate forecasters.The metals, used in catalytic converters, will be in a shortage for the longest stretch since 2005 for platinum and 2000 for palladium, Barclays Plc and Johnson Matthey Plc data show. Platinum will gain 13 percent to average $1,635 an ounce by the fourth quarter of 2014, according to the mean of eight estimates by the most-accurate analysts tracked by Bloomberg in the past two years. Palladium will gain 10 percent to average $823 an ounce, the most for a quarter since 2001
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The Philadelphia Gold and Silver Index – the XAU (for shares) – was up .52 at 100.23 touching 101.66 intraday. The recent peak was 115.21 intraday on August 27 which came off the big July 26 low of 82.28. Should we clear 115.21, look for 116.20 and 127.00. Under 82.28 (the June 26 low), I currently have no clear downside objective. The ‘big picture’ high was 232.72 in December, 2010.
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Copper was down .0035 at 3.2645. Resistance remains at 3.39, 3.44, 3.48, 3.5605, 3.5905, 3.7935 and the 3.8520 high from September 14, 2012. . Under 3.0065, next support (a possible target) is 2.85. The record high of 4.6495 was posted on February 15, 2011. With Copper being both volatile a leading indicator for world economies, watching its trend becomes very important. I have ‘big picture’ targets that begin at 4.00 followed by 4.50, 5.05, 5.55 and then possibly 7.00 over the next few years. Recall, Copper had hit a bear market low of 1.2710 back on December 26, 2008.
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