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
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold and Silver Enter Period of Low Volatility and Disinterest

Commodities / Gold and Silver 2012 Apr 23, 2012 - 12:45 PM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleGold and Silver have been correcting multi-year advances. In this article we illustrate what ultimately develops as these corrections progress into consolidations. Namely, volatility declines, general interest in the market evaporates and this produces sentiment that is conducive for an important bottom. Because these are long-lasting, sustained corrections, the bottoms take time to develop. There are many fits and starts and as a result, most bottoms are not obvious until months after the fact. We provide some charts to help understand what is currently taking place and what we can expect going forward.


Let's start with Gold. At the top we plot the average true range (ATR) indicator which is a helpful volatility indicator of sorts. When it becomes stretched or rises too high on the chart, we can expect a reversal in trend. Note that the ATR indicator often hits a low prior to or soon after the start of an impulsive advance. This occurred with every major move with the exception being 2008 when volatility peaked during the financial crisis which sent Gold down 30%. Also, the yellow shows what was an uncorrected two year advance from $900 to $1900. This 25-month advance has been followed by an 8-month correction. Using Fibonacci retracements implies a "time" correction of 9.5 months, 12.5 months or 15.5 months. This indicates that Gold should correct (in terms of time) for at least few more months.

$GOLD (Gold Spot Price (EOD)) CME

Next, we look at the commitment of traders report (COT) for Gold. The bottom rows show the commercial short positions as well as open interest. Note that the commercial short position is essentially near a three low which implies very limited speculation in the market. Moreover, open interest has declined since late 2010 and sits at a multi-year low. Traders are leaving this market en masse.

Gold  COMEX - Continuous

Turning to Silver, we find a similar situation. Periods of low volatility have coincided with the start of major moves in Silver. The examples are 2005, 2007, 2009 and 2010. Silver advanced from $8 to $49 in about 29 months. The market has been in a correction for 12 months. Applying Fibonacci analysis, we'd expect the correction to last 11 months, 14.5 months or 18 months. Thus, Silver could continue to consolidate for several months.

$SILVER (Silver - Spot Price (EOD)) CME

Moving to the COT, we see that commercial short positions are at 26.5K contracts which is relatively close to the 10-year low seen at the end of 2011. Open interest has begun to climb higher but it remains well below the peaks seen from 2009-2011.

Silver - Continuous

Markets cycle between periods of advance, correction and consolidation as well as periods of high volatility and low volatility. In the case of Commodities, these states tend to be magnified. Advances can be sharp and fast and the same goes for corrections. Because of this, multi-month consolidations are often required to digest these big moves. When the market finds an equilibrium, which occurs at low volatility, the primary trend can reassert itself.

The point is, Gold and Silver made major moves in recent years lasting 25 months and 29 months. Such moves are not corrected and digested in a period of only a few months. As we should know by now, it takes many months. As the market gets deeper into these corrections and they become consolidations, volatility falls, bullish sentiment recedes and general interest abates. These are the conditions that precede important lows.This isn't manipulation or conspiracy. Leave that to others. This is how markets work.

It appears to me that Gold and Silver could have a few more months of consolidation before the next big move can develop. Summer is naturally a period of low volatility when these metals make lows so be patient and keep your eyes out for bargains and a potential final low in the summer. For our subscribers we are currently compiling lists of our favorite producers, small producers as well as favorite exploration companies. It will take time for the bottom to form but in a few years you will wish you were buying in 2012 rather than musing over thoughts of a rigged market, conspiracy, manipulation and anything that does nothing to help you make money.

Good Luck!

If you'd like professional guidance in this endeavour then we invite you to learn 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.


© 2005-2019 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