Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Adaptive Fibonacci Price Modeling System Suggests Stock Market Peak May Be Near - 15th Aug 20
With Gold Above $2,000, Bulls Triumph! What’s Next? - 15th Aug 20
Stock Market, Asset Price Crash Dead Ahead - 15th Aug 20
NASDAQ vs. DJIA: Does the Recent Divergence Matter? - 15th Aug 20
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Will Gold Fall or is this Summer Different?

Commodities / Gold and Silver 2011 Jun 14, 2011 - 04:08 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleRecently, we had received a question from one of our Subscribers and we consider it to be of most importance at this market juncture. The question was:

Do you see a sharp pullback coming for commodities in general over the summer months?


In short – yes, we believe that the commodities move lower during the summer months. We would expect the precious metals to decline and enter a period which could be termed the “summer doldrums”. This appears likely to last through the month of August but this is simply our best guess at this time. The exact timing is truly unknown. The problems surrounding the coming significant declines do, however, appear to be quite profound.

The seasonal tendencies appear to play out in a way that is very similar to what we’ve seen many times in the previous years. Naturally, these are just “tendencies” not sure bets, but it seems that other signals from the market support them.

Let’s have more insight on the bearish trend by analyzing the current market technicals. We will begin with the gold charts (charts courtesy by http://stockcharts.com.)

In the very long-term chart for gold, we have seen yet another attempt to move above the rising trend channel. This will probably not succeed and will likely be quite similar to what was seen in late 2010. At that time, a period of sideways price movement near the upper border of the trading channel was followed by declining prices.

Let’s zoom in for more details.

Last week GLD ETF has moved rather insignificantly higher (until Thursday that is). On Thursday, gold’s price moved up 0.5% on very low volume. This very low volume during a rally normally indicates that buying power is drying up and it seems that this interpretation is correct at this time, as it’s being seen after a few-week rally. It could be a sign that many will be exiting the market soon which will lead to lower prices.

We have seen no evidence of a strong bounce from the support line now in play. There was a rather weak attempt with insignificant success to move higher. Right after that gold price broke below the rising trend channel on strong volume, which a bearish indication. This tendency held on Monday, which means that we have most likely seen an end of the contra-trend rally. Please note that another move up on low volume would be a bearish signal, not a bullish one.

Consequently, the outlook overall is bearish for gold with numerous signs pointing to lower prices and few, if any which could be read as signs to the contrary.

Let’s have a look at gold and silver mining stocks too.

In the very long-term XAU gold and silver mining stocks index chart, we see a move below the level of the 2008 intra-day highs down to the level of monthly closing prices. It appears that the previous upswing was just a verification of the breakdown below the 2008 intra-day highs. Since May index levels have declined, moved back to the level of 2008 highs after having bottomed at highs based on monthly closing prices, and then declined again. In sum, it seems that the move below 2008 intra-day highs has just been confirmed, which is very bearish news for the whole sector.

In HUI Index (gold stocks) chart, the signs are even more bearish. One of the key support level has been broken and the move has been verified. Namely, the rising dotted line in our chart provided support numerous times in the past but has been broken and this breakdown was verified as resistance several days ago.

Moreover, gold stocks appear to be completing the bearish head-and-shoulders pattern and if the index level moves below the level of previous lows, the completion of this pattern could lead to a considerable decline in the HUI Gold Bugs Index. It appears that the index could in fact move below the 450 level, which has not happened for nearly a year. Naturally, that would have profound negative effects for the underlying metals as well.

The above chart shows the ratio of gold stocks to gold itself. In our Gold Price Direction Based on Investor’s Sentiment essay, we discussed the underperformance of gold stocks and suggested that the rally was close to being over. At that time we stated the following:

We can clearly see the underperformance of gold’s stocks in recent days without using this ratio, but a look at the chart of the ratio shows that the gold mining stocks underperformance is significant. Investors with holdings in gold at this time should be concerned with its medium-term rally in light of the poor performance seen recently for gold mining stocks.

The patterns seen at that time were actually less profound than what we have seen since. This seems to infer that another move lower for precious metals is likely just around the corner.

Summing up, in our view, the technical analysis suggests a downturn in the precious metal sector. The situation for gold and silver mining stocks appears bearish overall as well as individually even without negative influences from the underlying metals. It seems that if the head-and-shoulders pattern is completed in the HUI Index (gold stocks) chart, the whole precious metals sector could decline significantly in the near-term.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

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 Radomski Archive

© 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