Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
Reconciling the US Dollar Outlook with the Super Bullish Gold and Silver COTs - 26th Jul 17
Last Week’s Rally in Gold Stocks Erased - 26th Jul 17
Dollar, Bitcoin, Markets - Is There A New Flight To Safety? - 26th Jul 17
Central Banks ARE The Crisis - 26th Jul 17
Iran: Public Image Versus Historical Reality - Part 1: An Abridged History to the 20th Century - 26th Jul 17
Trump Fails To Understand One Critical Thing—Our Trade Partners Have Options, Too - 26th Jul 17
Stock Market and Gold Stocks Trend Forecast Update - 25th Jul 17
Saving Illinois: Getting More Bang for Its Bucks - 24th Jul 17
3 Stocks Sectors That Will Win in The Fed’s Great Balance-Sheet Unwind - 24th Jul 17
Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same - 24th Jul 17
Stock Market Still on Track - 24th Jul 17
Last Chance For US Dollar To Rally - 24th Jul 17
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

Gold And Silver When Fundamentals Fail And Charts Prevail

Commodities / Gold and Silver 2013 Nov 17, 2013 - 12:46 PM GMT

By: Michael_Noonan

Commodities

There is a decline in the number of reads in our articles that do not provide a fully developed "fundamental" story about why gold and silver should be much higher in price, [but are not]. Relying upon charts to more accurately capture the developing "story" does not capture the imagination of as many readers, for whatever reason. We attribute this to Confirmation Bias where a reader wants to read an article that confirms his/her beliefs The accuracy/validity/truth may or may not be true, but is satisfies an emotional need for affirmation.


The true story of gold and silver is a simple one. There is a recognized and acknowledged shortage of supply in opposition to the greatest demand for both precious metals, for at least in recent memory, if not all time. Current prices are in total disregard to the fixed law of Supply v Demand, or perhaps more accurately stated, in total defiance of that law. It is the most reliable of truths that when demand is in far excess of supply, price goes higher.

This has not been the case for precious metals for the past two years, as central banks have been actively suppressing prices in order to preserve their fiat currencies, particularly the Federal Reserve's "dollar." In our last article, Cognitive Disconnect Between Physical and Paper, we covered several aspects that addressed political/central banker motives that account for why gold and silver are not rising in value.

It is all about money, following the money, for money is power, and those central bankers currently in power face losing it. Desperate people do desperate things, and the power- hungry will destroy all currencies to keep themselves where they are. Even they know the clock is ticking. Repeating statistics, dwindling exchange supplies, etc, etc, etc, has done nothing to otherwise explain why PM prices remain low.

Fundamentals are relative, charts are absolute. They accurately reflect all that is going on, regardless of reasoning/motivation. A few, or some, the number[s] do not matter, have no regard for the validity of PM charts which reflect a bogus paper market. To an extent, the paper markets are bogus, but the number of contracts being sold are large, much larger than buyers, and this ironically reflects the reality of supply v demand.

As to the physical, China being the largest buyer for whatever is available, there is no reason for China and the other buyers to want price to go to higher levels when they can be buying so cheaply. The suppressed prices may even be an accommodation to China and others to compensate for the depreciating/disappearing "value" of toxic bonds the US has been dumping on the world for so long. That game is over, but no one has a fix on the time line for ending the fiat currency Ponzi scheme and reverting back to some kind of gold-back currency sponsored by China and the other BRICS nations.

Right now, the charts are letting us know that higher PM prices are unlikely to occur anytime soon. Barring some kind of "overnight surprise" that will shock the markets, odds favor lower prices over higher prices unless and until demand shows up in chart activity.

Whenever a trend is down, the onus is on buyers to create a change. Right now, that is not happening. We show the bearish spacing, a sure sign of weakness and one of sellers being in control. The 50% retracement level is also shown, and the August swing rally failed to reach that level. A half-way retracement is a general guide used to measure the relative strength/weakness of a trend. In a down market, when a retracement rally cannot retrace to the half-way level, it is a sign of greater market weakness.

There is a small possibility of a low from the last week of June, and there have been two potential retests that have held, so far. If this lower probability proves out, it is unfolding in a weak manner, which is no surprise given what was just explained about the character of the market's overall weakness.

Assume for the moment that we are looking at a possible low, because it is developing slowly, even under this scenario, it will take much more time for buyers to turn this market around. Should price go lower still, then the time frame for a turnaround will be extended even more.

This is a weekly chart, and it take more time and effort to make a turn in trend.



The fact about the daily gold chart is that it continues to make lower highs, and that is a characteristic is a down trending market, so the message here remains clear. There was a high volume strong rally in mid-October. The bar is marked "D/S," Demand over Supply. This positive expression of demand was erased by the 4th bar from the right. Another fact is that the October rally effort was totally retraced, last week. Both are signs indicating the weak character of the gold market.



Silver is not faring any better. Regardless of whatever positive fundamental consideration one can advance, the chart structure is telling us silver is struggling. We see evidence of that from the bearish spacing, supportive of overall weakness.

Also, note the location of the last two little swing high rallies. The last one, 3rd bar from the right, is a lower swing low, a sign right there, but both fall short of rallying half-way in the down channel, once again, echoing weakness.

As with gold, the June low has the potential of being a bottom, but it needs more confirmation than we are seeing, to date.



The arrow pointing to the sharp increase in volume, and the poor close on the bar, at a support area, resulted in a price gap up from the close, next day. It could be a small bear trap. Friday's close was upper end on the bar, and that says buyers won over sellers for that day. The only caveat we hold is how price has been unable to rally from support right away, as it did at points 1 and 2. Weak rallies lead to lower prices, so buyers better step up on Monday, or silver can break current support.

The best feature about buying physical gold and silver is that charts do not matter. Just keep on buying, especially at these lower prices. These low levels may last for some time, but timing is less of an issue for accumulating tangible assets that cannot be debased and have no counterparty risk. Beat the central bankers at their own game.


By Michael Noonan

http://edgetraderplus.com

Michael Noonan, mn@edgetraderplus.com, is a Chicago-based trader with over 30 years in the business. His sole approach to analysis is derived from developing market pattern behavior, found in the form of Price, Volume, and Time, and it is generated from the best source possible, the market itself.

© 2013 Copyright Michael Noonan - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Noonan Archive

© 2005-2017 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

Catching a Falling Financial Knife