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
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
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 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
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

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

Gold Price Breakout and Breakdown

Commodities / Gold and Silver 2013 Apr 06, 2013 - 12:30 PM GMT

By: P_Radomski_CFA

Commodities

It seems that collective memory is becoming shorter and shorter. We just celebrated two important holidays in the Judeo-Christian traditions that commemorate events that took place thousands of years ago. Yet, now, in the age of Internet, people seem to forget major events after weeks, or even days. Given this weeks' performance in the precious metals, people have forgotten that only two weeks ago Cyprus was on the brink of unraveling not only the European union, but the sacrosanct foundations of fractional banking, with the crisis highlighting the fundamental fault lines of both.


On Wednesday silver for immediate delivery slid as much as 1.3 percent to $26.9175 an ounce, the lowest since July 25. Gold is now trading below the pre-Cyprus crisis level and is challenging the two-month low.

There is a difference between a bear market and a correction, which is a short-term trend with a shelf life of less than two months. In a bear market, widespread pessimism becomes self-sustaining. Many consider a downturn of 20% or more over at least a two-month period to be an entry into a bear territory. We disagree with this definition in case of precious metals. The secular bull market remains in place as long as fundamentals remain in place - and that is clearly the case with silver.

According a Credit Suisse Group AG report Wednesday, global government stimulus has cut the likelihood of further banking and liquidity crises and reduced the need for a protection of wealth. The bank cut its 2013 gold forecast by 9.2 percent to $1,580 and lowered its silver estimate by 11 percent to $28.50.

We can only guess that the folks at Credit Suisse have forgotten as well. It was only last Thursday that Cyprus cautiously opened the doors of its banks but tightly rationed withdrawals. People could only withdraw 300 euros of their own money, couldn't freely cash checks or use their bank to pay suppliers who use other banks. In a few short weeks Cyprus lost its status as an offshore banking center with a banking sector 7 times larger than the annual GDP.

The restrictions are meant to keep Cypriots from emptying their accounts in the wake of the bailout deal announced last Monday that would drastically prune Cyprus's oversized banking sector, bloated by deposits from Russia and other former Soviet Union countries. Although the deal scrapped the highly controversial idea of a tax on bank deposits, it would still require forced losses for depositors and bondholders, with the amount to be yet determined. The ink has not even dried on the Cyprus story. We have gotten the message loud and clear that gold and silver are the ultimate monetary assets. Now we need to wait for everyone else to get it without losing our shirts in the process.

We have gotten the message loud and clear so let's have a look at the yellow metal's technical picture - we'll start with its the very long-term chart (charts courtesy by http://stockcharts.com.)

We saw a significant price decline this week.

Even though the situation is still bullish, as gold is above its long-term support lines, it seems that it could be the case that the next long-term turning point in gold may be a major bottom as opposed to a top.

At the same time, although prepared and looking to the downside target level, it does not mean that the situation is bearish for the medium term. RSI levels are still oversold, so gold may not decline significantly.

As we discussed in Thursday's Market Alert sent to our subscribers:

Gold could actually decline to $1,350 or $1,100 and still remain in a secular bull market (in mid-70's this gold retraced almost 50% of its earlier high). Don't panic - this is not a likely outcome. The consolidation is already almost 2-years long (2-years long in case of silver), investors are already very discouraged and the fundamental situation (QEs among other things) is in our opinion more favorable than it was in the 70s.

Let us now see how the situation looks like from the non-USD perspective - we'll use a GOLD:UDN ratio as a proxy here.

GOLD:UDN ratio

Here we see mixed short-term signals this week. The breakout above the declining resistance line has been invalidated, but the declining support line has held. Even if broken, another is just a bit lower. The situation is mixed for the short term but the medium-term outlook remains positive.

Let's have a look at the yellow metal priced in Japanese Yen now, as some important bullish events took place on this market.

$GOLD:$XJY Ratio

We see there was a sharp decline on Wednesday followed by a quick pullback on Thursday when the Bank of Japan announced a huge round of quantitative easing. This is indeed a very significant move and a very positive long-term factor for gold. Gold reacted immediately and in terms of the yen remains quite bullish.

Finally, let us turn to gold priced in Australian dollar.

$GOLD:$XAD Ratio

This is our most concerning chart today. Periods of consolidation over the past six years have not resulted in gold's price moving below the previous low until now.

Summing up, if we see a repeat of this week's price declines, we will likely need to consider hedging long-term positions in gold. So far, no breakdown has been seen except for gold priced in Australian dollars and at the same time we have a breakout in case of gold priced in the Japanese yen. The medium and long-term outlooks remain bullish.

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we encourage you to sign up for our gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

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

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, 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