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Gold & Silver in a LT rally

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Gold and Silver just got simpler for me with Friday's price action.  Since my previous post both of these markets have dropped hard and Silver in particular has closed below my potential neckline, albeit marginally and at support.  Gold still has some way to go to catch up on Silver.  I see the likelihood of a rally from here as low given a dearth of appropriate signals.  I still believe it is more likely we will see a rally in precious metals when stocks eventually capitulate, although it could begin first in safety assets as Bulls begin to shift Bearish, the first movers so to speak.  I remain in favour of Gold turning around the Fib 50% and Silver retesting the long term supporting trend-line.  I will continue to track all my indicators to see if I get an across the board buy signal around these points.  Although not at all predictive it does seem like markets in general are trending to a resolution, one way or another, around about the end of May... 

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PS: forgot to add, net COT data hit triple digit positive (+128k) on Tuesday last, just as the market spiked and dropped, a contrarian dream...  Silver continues to deteriorate into negative numbers.  This supports my view that Gold will now hammer down faster than Silver in a catch up move as the non coms unwind their Longs pronto. 

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Sliver is pretty much down to long term trend line. Bearing in mind the Gold/Silver ratio, Silver has got to be considered as oversold. Doesn't mean it can't drop further though !!

Keep a close eye on those silver miners, may soon be time to go all in.

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Bit more to go yet @draa46 but it has certainly stalled on my possible neckline.  Given Gold probably has a way to go to bottom out then Silver should drop further, although I expect not by much and a fair bit of consolidation action between current levels and the LT trend line around 1420.  It is the breakout from such a consolidation, if it happens, that is of interest for Precious Metal Bulls, especially if Gold is also breaking out of a credible turn point.

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Silver is providing a better set of indicators than Gold for me at present, and is a more lucrative market to trade (more risky too therefore).  The precious metals are still conforming to my road map, and all 3 of my scenarios remain in play (2 Bullish, 1 Bearish).  For me the Bearish one is not a strong scenario, unless you believe in a continuation of the Bull market in stocks for the next few years, which I do not.  With Oil looking Bearish, and stocks too, I think it is only a matter of time before the precious metals Bull triggers big time.  Maybe the trigger will be a USD bear move short/medium term?  Precious metals do seem to be acting more in concert with currency just now than as a safe haven.  I think the latter will be what drives the Bull out of the larger time horizon consolidation but short term it could be USD weakness that kicks things off.  That also means I am not yet convinced we have seen stock indices capitulate but if they do then Precious metals should explode up.

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1 hour ago, Mercury said:

Silver is providing a better set of indicators than Gold for me at present, and is a more lucrative market to trade (more risky too therefore).  The precious metals are still conforming to my road map, and all 3 of my scenarios remain in play (2 Bullish, 1 Bearish).  For me the Bearish one is not a strong scenario, unless you believe in a continuation of the Bull market in stocks for the next few years, which I do not.  With Oil looking Bearish, and stocks too, I think it is only a matter of time before the precious metals Bull triggers big time.  Maybe the trigger will be a USD bear move short/medium term?  Precious metals do seem to be acting more in concert with currency just now than as a safe haven.  I think the latter will be what drives the Bull out of the larger time horizon consolidation but short term it could be USD weakness that kicks things off.  That also means I am not yet convinced we have seen stock indices capitulate but if they do then Precious metals should explode up.

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Sir gold chart

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Gold has arrived at an important juncture for me but before that looking at that I looked back at the long term charts to remind myself of the big picture.  Unsurprisingly there are 2 scenarios (1 up and 1 down), actually a third which is continued consolidation (sideways) because in the big picture Gold remains in a long term consolidation Triangle, which is narrowing.  This is significant as at some point Gold will breakout of this Triangle and that will signal the resolution to which of the 2 scenarios wins out.  For my money it is scenario 1, a massive Gold rally in concert with a massive stocks Bear as Gold once again reverts to its historic role as a store of value in uncertain times, and do we ever live in such times..!  Note under these conditions Gold can, and almost certainly will, go in the same direction as USD.

So I am Bullish gold and given all the bullish chatter of late you might imagine I am happy.  Alas I remain unconvinced of this rally and will not be so until there is a break of the previous high, around 1347, which we are very close to. Actually I really want to see a break of the upper resistance (LT Triangle line and potential H&S neckline breakout).

The short term offers 2 scenarios as well: the first a break of that prior High and turn at 1347, the second that we are currently seeing a wave B turn back down to a final wave C bearish run of the EWT1-2 retrace and a test of the Fib 50% line (also Weekly chart Fib 23%) before the true rally gets going.  I am minded to the latter unless or until I see a break of the 1347 high. 

Technicals:

  • A-B-C retrace could be completed where I have marked Green A at 1266.  A break of the 1347 high would confirm.
  • If not then the retrace is a complex version and the market will turn before or at 1347 and drop in a wave C.  The form of the rally is currently in an A-B-C, which is not motive, however a break of the 1347 zone will change this set up.
  • There is an un-closed gap around the Fib 50% level.
  • There is a pin bar and inside bar price action formation at the current market area, showing a potential turn once this is resolved.
  • RSI and Stochastic are over-bought.
  • There is NMD on the 4 hour and 1 hour chart at the pin bar high, although we could yet see another test of the 1347 level before this resolves.
  • Note also that we have seen a reverse Death Cross (some call this a Golden Cross) but I would ideally like to see a cancellation of this and then a final cross to cement a rally.  This will only occur if we get a big bearish move now followed by a wave 2 retrace turn into a very strong rally.

I am not looking to trade the bearish move, I prefer to wait for the Bull rally triggers and prefer to trade this in Silver rather than Gold, the former having remained more subdued.  Add to that the Platinum bearishness and I can't yet see a case for precious metals rally.  I think we will see continued stocks bullishness for a while, albeit likely to contain a lot of whipsaw action rather than a rocket, which does not support a massive precious metals rally, yet.

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So we did see a fresh higher high on the current rally but I remain unsure of this rally so long as it remains under the key resistance levels around that 1360 area.  It is possible the last retrace is simply a pennant (albeit a big one) in a wave 1 rally that could terminate around key resistance and plummet back to close that gap.  A clear breakout of the 1360 area is what I need to go all in Bull on Gold (or I should say resume).

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Gold hit a new high as my road map had projected and right on cue bounced back down off the potential neckline resistance.  The drop was quite strong, stronger in Silver and produced a Bearish pin bar on the Daily chart.  COT was high at net +205, supporting a contrarian turn however it has been a lot higher so this is not conclusive.  I could easily see another leg up before a drop, especially if USD drops off from here.  Ultimately I would need to see a breakout of the crucial resistance zone to get Long again but am not minded to trade this Short as there are too many scenarios in play.

If a Bear move is on the cards I would expect a break and retest of the 1 hour Triangle and rapid fall away.  Of course we would see this kind of price action for a short term bearish move as a presage to another higher test of Resistance above.

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    • I am kicking myself for not trading the breakout of gold now My thinking now is that I'd like to see 1346 established as support and go long from there.  It's pretty obvious (now, with benefit of hindsight) that the May selloff on the indices was a relatively shallow retracement of an uptrend, so gold will probably be stuck in the doldrums again for some time.
    • 👍🏾Yes let us see and it will certainly be interesting as from a trading perspective It could start to get rather tricky with all the potential uncertainty floating around. This may benefit the price of Gold and Bonds but if the Fed lowers interest rates then you could be right.
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