Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Outlook in 2012

Commodities / Gold and Silver 2012 Jan 17, 2012 - 06:23 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleLately we've been writing about the precious metals stocks. In particular we believe the equities have made a multi year bottom and look ready for a solid 2012 and 2013. Part of the reason is the action in the metals (Gold & Silver) suggests an important bottom is in place and a rebound is underway. Based on our work, we anticipate a slow but gradual rebound in both metals.


The current bottom in Gold bears similarities to what we saw in 2006. First we show the bottom in 2006. Note the previous bull flag (blue), the double bottom pattern and the final low occurring at the 300-day moving average. Going forward, Gold rallied for five months and recovered over 75% of the losses.

Gold

Note the similarities between the past and the present. Both corrections occurred in five months, both occurred in a simple A-B-C pattern where A and C were nearly a double bottom and both bottomed above the previous bull flag at the 300-day moving average. Thus, we would not be surprised to see Gold rebound in a gradual fashion into the spring. It will be a while before a new high but we do see Gold getting back to $1800 in the first half of this year.

Gold

While Silver corrected more than 40%, we believe it made a major bottom at $26, which hosts a major confluence of support. First, note the 600-day moving average, which provided important support in 2007, late 2009, 2010 and recently. Secondly, $26 was the bottom in both January and on the spike low at the end of September. Third, $25 was the key rebound peak after the crash in 1980 and has been a very important price point in the last bull market and this bull market. Finally, the 50% retracement of the current bull market is $26. Need I say more about the importance of the recent bottom occurring at $26?

Silver

Clearly, bubble callers have not consulted the latest commitment of traders reports for Gold and Silver. In fact, I doubt most of them even know anything about the COTs. The current structure of the COTs is very supportive to Gold and Silver bulls. (Source: SentimenTrader.com).

First we look at Gold. Note that commercial short positions and speculative long positions are at levels last seen in early 2009.

Gold COT

The COT structure for Silver is even more encouraging. Recently, the net commercial short position in Silver was at an eight year low. The speculative long position was at an eight year low and the small trader long position was at its lowest point during the entire bull market.

Silver COT

Public opinion, also courtesy of SentimenTrader.com, shows 58% bulls on Gold and 39% bulls on Silver. A few weeks ago these figures were at multi-year lows. Let me ask you. Months after a peak in a bubble, is the public cleaned out and pessimistic as the data shows for Gold and Silver? No. In fact, its the public that remains optimistic and continues to buy after the initial peak. That is hardly the case at present.

Simply put, there are only two conclusions a reasonable person can posit. Either the bull market in precious metals is over and a small reflex rally is coming or the bull market has made a major bottom. We believe the latter. The bull market is far from over for obvious reasons. Considering the evidence it seems highly likely that Gold and Silver have made major bottoms.

That being said, Gold and Silver have incurred technical damage and it would be excessive to expect more than a gradual recovery. We believe the current bottom in Gold is similar to the bottom in 2006. Gold recovered its losses steadily but it would be nine months until the market began an impulsive advance that resulted in new highs. Silver rallied back to its highs but in total it was nearly eleven months before it began an impulsive advance to new highs. Essentially, we expect these markets to be in consolidations for 2012. It just so happens that we are starting from the low point which based on the evidence, is likely to be a major low. Those with patience should accumulate physical now. Meanwhile, those who are looking for growth and capital appreciation should consider the mining stocks.

If you'd like professional guidance in riding this bull market and uncovering the winning companies then consider learning more about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com
Subscription Service

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.


© 2005-2022 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