Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Several Factors Suggest the Bottom in Gold and Silver Correction Is Near

Commodities / Gold & Silver 2009 Jun 15, 2009 - 06:30 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleThis essay is based on the Premium Update posted on June 14th, 2009

In my previous essay (and in my previous Premium Update, which you will be able read, as it is now posted on my website as a sample version) I wrote the following:


(...) once you consider details, the outlook becomes rather bearish in the short term. The point here is that volume has been declining while gold has been rising and it rose along with declining gold price. Volume usually confirms the direction in which the market is headed, and this time it points to lower prices in coming days. Naturally, a day or two of pause are possible (and also quite likely), as gold is currently just at its support level, but still - it is likely that gold will move lower in the short term.

This is exactly what took place during the rest of the week - we had slightly higher prices of gold, silver and mining stocks in the middle of the week, but they closed lower on Friday. Of course the key question here are: "Is the bottom already in?" and "Is it safe to get back on the long side of the market?" In short, it seems that we are going a little lower before we will reach a local bottom.

Gold

Moving on to the current situation, let's begin with a gold chart. Charts are courtesy of stockcharts.com.

At the first glance, the situation on the gold market looks quite bullish. Gold has advanced substantially from April to June, and has been correcting since the beginning of this month. Corrections are to be expected on any market, and gold is no exception here, so until we see evidence that this correction is anything more than just that, we remain bullish in the long run. Right now the price of gold (and also the value of the GLD ETF) has closed at its long term support level (solid blue line), which generally indicates that a rebound is likely.

Generally doesn't mean always, and it is usually useful (and profitable) to put "general rules" into proper context before making any investment decisions. As mentioned above, the price of gold stopped at the rising support line. However, did gold rebound in the past when the situation was similar? I have marked two situations with dashed lines on the above chart.
Please note that each time price got to the analogical support line it has briefly broken it before rising again, so this may be the case also now.

Additionally, previous bottoms were accompanied by particular signals from the stochastic indicator (as seen on the bottom of the gold chart). Several weeks ago I wrote about the RSI indicator as particularly useful in timing top on the precious metals market. Naturally - there is no perfect tool. RSI is not that useful in determining bottoms on the PM market, as it is the case with tops. Still, there are many more indicators than just the Relative Strength Index, and one of them proved to be particularly useful in estimating bottoms in the recent past. During the past several days most meaningful bottoms took place when stochastic indicator was below the 20 level and it started to rise (thus crossing its moving average) - I have marked these situations with red ellipses.

Currently, the stochastic indicator has moved lower, but it is not yet below the 20 level. Therefore, there is another significant confirmation of the previous conclusion - the bottom is near, but it is yet to materialize. How low can it go temporarily? We will leave this part of our analysis to the Members of our Premium Service.

Silver

The first thing that comes into mind after taking a glimpse at the above chart is that silver has held very well during the current decline. The strength in the silver market should not surprise you, if you've been following my analysis for some time now - I've written about the particularly favorable situation on the silver market on 20th of April.

As far as the target for this decline is concerned, the situation is similar to the one in the gold market. The area in which the bottom is likely to take place is marked with a red ellipse and it contains levels corresponding to two important Fibonacci retracement levels: 38.2% and 50%. Prices of many assets often correct these parts of their previous move before resuming their main trend (for example the 38.2% level stopped the decline at the beginning of March 2009). Another important level that this ellipse contains is the lower border of the short term trend channel - if we get the C decline of the ABC (zigzag) correction it may go exactly to this support level. I currently view such a decline as likely.

Summary

After having rallied in May, the whole precious metals sector entered a corrective phase, which began two weeks ago. Currently many factors suggest that the end of this correction is near. The coming bottom is likely to provide a favorable buying opportunity for long-term investors with the "buy more on the dips" approach.  Short-term traders are advised to consider preparing themselves for opening long positions and closing remaining short ones in the coming days.

To make sure that you get immediate access to my thoughts on the market, including information not available publicly,  I urge you to sign up for my free e mail list. Sign up today and you’ll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM investors and speculators. It’s free and you may unsubscribe at any time.

    P. Radomski

    Editor

    Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw RadomskiArchive

© 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

6 Critical Money Making Rules