Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Analysis - Precious Points: A Bounce is a Bounce

Commodities / Gold & Silver May 20, 2007 - 09:15 PM GMT

By: Dominick

Commodities

“A continuation of reverses (signaling continued weakness) would most likely continue to trigger liquidation of large gold positions and put downward pressure on metals… What gold needs to get its groove back is a rebound in the economy with an uptick in inflation.” ~Precious Points: Don't Fear the Repo , May 13, 2007

The Fed continued reducing the money supply this week by failing to place as many dollars through repos as were removed at maturity. Not surprisingly then, metals continued their downward slide through the early part of last week.


But, as expressed in the previous update, signs of a resilient economy began the recovery and, in fact, gold and silver put in short term bottoms on Thursday once investors digested optimistic statements by Chairman Bernanke and the drop in jobless claims. Rate cut odds receded, as priced by the Fed funds futures, and Friday's stronger than expected consumer sentiment sealed the deal, confirming what the trend cycle charts were already suggesting was a tradeable bounce at Thursday's close.

The 60min chart went positive (blue) during the first hour of trading Friday morning and closed just slightly above the blue, dotted moving average line, suggesting a continuation of the rally lies ahead. There's little news next data, economic or earnings, but traders should remain cautious and not assume a quick bounce is the start of a new uptrend.

Gold and silver rallied Friday despite a surge in the dollar against the Euro and the Yen, and in the face of a triple-pronged tightening effort in China . Metals could continue Friday's run if this rally in the dollar reverses and takes out new lows, but because it will probably be very difficult to stage a run to new highs in the face of a strengthening or even steady dollar, and the attractiveness of U.S. markets has been has seemed to put a floor in the dollar index. Platinum traded along the same general lines as gold and silver, and the chart from last week continues to suggest the likely target for this move.

Metals seemed to get a boost from stocks, perhaps because of hedging or allocation maintenance, Week in and week out, stocks have gone higher and higher on foreign investment and multinational profits, as the United States' accommodative money markets remain an appealing home for foreign capital, but for the most part, metals have not gone along for the ride.

Supply and demand of real physical metal continues to be a major factor in preventing a freefall selloff in metals, but as mentioned in several previous updates, it's investor demand that creates most of the price action in metals… and to put it mildly, metals have not been attracting much investor attention lately.

Months ago, the Fed threatened that slowing growth would dampen inflation and they seem to have gotten their wish. Despite robust bank lending, M2 has actually started a mild contraction and the Fed has reduced the total volume of it's sloshing repo funds for four consecutive weeks. The last round of inflation data was relatively tame and the net result has been stagnation in the metals bull.

This update is on the record as saying that gradual deflating of the bubble in China 's red-hot stock market would benefit metals long term if it prevents a collapse. There's speculation that the recent spike in bond yields is a result in China swapping out of a large chunk of their U.S. Treasuries holdings, which could also be a motivation for the Fed's recent stinginess. The gradual rising trend in global interest rates is only beneficial to metals if it does not begin to flatten inflation readings, and with China starting to apply the breaks, the best way to maintain this is through a resurgence in the U.S. economy.

So, consumer confidence helped end the week on a positive note, but consumer confidence is not consumer spending, and that's what will ultimately have to continue if the economy is going to turn around. If China is partly responsible for the selloff in bonds, then there isn't as much economic optimism as might otherwise be read into the spike in yields. Until the economy recovers, new highs in the metals aren't on the way, and, if the downside seems at least for the time being to be limited, the reality continues to be more of the rangebound trading this update has been expecting for weeks.

In the alternative, stocks could be overextended and due for a pullback, and metals probably won't provide much cover. The silver chart below illustrates such a scenario. Having violated the trendline, the critical levels to watch are the 50-day moving average on the weekly chart just above $12.50 (the bottom end of the expected range), and the previous lows at about $12.50 and $12. Losing the first level suggests a move to at least the second. If silver holds the previous swing at the $12.50 area, it may have another up move in it, but if not, we may have already seen an intermediate term top, which brings the 200-day moving average into play.

RSI hints that silver is at or near a bottom, and if stocks continue to move into a parabolic ascent, the metals will probably be spared a selloff, at least while the rally is on. For gold, risk of a double top at $700 becomes the challenge in that case. The chart below shows gold catching support last week at the multi-year trendline. If this level is lost, the 50-day moving average represents support in the $635 area. Even a decline to $610 would preserve the uptrend from the June '06 lows.

TTC's proprietary 60min trend chart is looking for this move to continue, but that doesn't necessarily require a dramatic change in price. In fact, the entire previous up-cycle, a period of about 2 days and 6 points, is still pictured in the chart below, suggesting that sometimes a bounce is just a bounce.

But the purpose of this update is not to provide ideas for intraday trades, just to discuss larger week-to-week trends in metals. For short term futures trading, you'll want to use the trend cycle charts and the good people at TTC, where membership is still just $50 for a month … but not for long!

by Joe Nicholson (oroborean)

www.tradingthecharts.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in