Gold: Descending Triangle, Watch Out Below – Maybe
HAC does not own any gold, but I am commenting on the sector at this time because of its relationship to silver. In previous newsletters I have stated that silver is a much better seasonal investment than gold at this time of the year, despite both being precious metals. This has proven to be the case this year.
In general, the precious metals group moves up and down together, with different metals outperforming at different times. If gold has a major breakdown in price it would be expected that silver would echo its performance, or vice versa. Currently, gold has been putting in a bearish performance, and has once again formed a descending triangle. Investors should be concerned about this pattern at this time.
Some readers may challenge me on this, as I stated that gold was a strong buy back in July when it had formed exactly the same pattern. To be absolutely clear, I stated that a descending triangle is NOT bearish at the start of a strong seasonal period. Most descending triangles are resolved to the upside when they occur at the start of a seasonal period.
On the other hand, when a descending triangle is formed “out of season,” this is considered bearish as most of these patterns are resolved to the downside. Gold is currently in a bearish descending triangle and if this pattern is bro- ken to the downside, the target level for gold is $1550. If it does have a large drop, it is inevitable that silver will follow suit, despite still being in its strong seasonal pe- riod. Investors should be watching gold’s support level of $1650, which is below its 50 and 200 day moving aver- ages. If this level is broken, investors should be watch- ing silver for a similar breakdown. The support level for silver is $30. If this level is broken, investors should con- sider exiting the silver trade early, despite the seasonal period end date of March 31st.
Just because gold is in a bearish descending triangle pat- tern does not mean that it is going lower. It is possible for it to move higher, but the odds support a move lower.
Silver- Doing well, be careful, but don’t write it off yet
Despite giving breakdown levels for gold and silver in the above commentary, silver has performed well so far and it still may have a strong run. Silver is part precious metal and part industrial metal. If the base metals start to pick up this should provide a boost to silver.
Ed Note: Much more in Brooke’s FREE Monthly “Thackray Market Letter which can be accessed HERE
Disclaimer: Brooke Thackray is a research analyst for Horizons Management Inc. All of the views expressed herein are the personal views of the author and are not necessarily the views of Horizons Management Inc., although any of the recommendations found herein may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment Management Inc. HAC buys and sells of securities listed in this newsletter are meant to highlight investment strategies for educational purposes only. The list of buys and sells does not include all the transactions undertaken by the fund.
While the writer of this newsletter has used his best efforts in preparing this publication, no warranty with respect to the accuracy or completeness is given. The information presented is for educational purposes and is not investment advice. Historical results do not guarantee future results
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