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…As encouraging as the recent rallies in gold and silver may seem, they are still just
rallies within a clearly defined down trend. For trading purposes, there is no reason to be long. For buying and holding physical gold and silver, there are too many reasons not to be long. Plan accordingly.
The above introductory comments are edited excerpts from an article* by Michael Noonan (edgetraderplus.com) entitled Gold And Silver – Is the Golden Rule Broken?.
Noonan goes on to say in further edited excerpts:
Silver Comments
Silver may play a pivotal role in the next rally phase for PMs. If nothing else, the ratio of
gold to silver says it will eventually come in from its present 73+:1. The ratio could go still
higher: 80:1, 90:1, who knows, as a bottoming process unfolds.
When price declines, the ranges are greater than when price rallies, and that is the character of a market that is struggling to go higher. Unlike gold, silver has not even come close to regaining a close back into the broken downside of 18.
The smaller range of last week reflects the struggle for buyers to extend the rally higher. However, the close was at the high-end of the range, and it is a better show, relatively, for buyers over sellers. The upper range close gives a higher probability of an extended rally into next week. How much higher is not known. It could be just a little or a lot higher, but there is no apparent change in trend.
…The market’s ability, or lack of ability to sustain a rally, can be seen in the chart below where] you can see the swing low from early October when it acted as brief support. Once that support was broken, at the end of October, it became potential future resistance. The current rally has stalled just under that level…[which] may be buyers absorbing all the offers from the sellers prior to moving higher. The highest volume effort has been on rally days. The prospects for a bottoming process continues, without necessarily saying a bottom has been established.
Will the low from 3 weeks ago hold and establish a bottom? The only way to ever know that for certain is from future developing market activity that confirms a bottom is in place. What would that be? A series of higher swing highs followed by higher swing lows. It takes time and patience for a bottom to be confirmed. Just ask those who thought the market reached a bottom over the past few years.
Which way will silver go? There is no need to “guess” or “predict,” in advance. It is a future event, and no one knows how the future will unfold. Better to watch how the market activity develops, and at some point, an opportunity will present itself. The race to be first to “know” is an ego-driven one that is typically costly and a fool’s game.
Gold Comments
[As can be seen in the chart below] the current rally from November is creating a swing high.
What must follow is [that] the next reaction lower has to stay above the November low…[but] there is no evidence yet that the November low will hold. It may, but its realization as a low can only be confirmed by future activity.
Conclusion
For trading purposes, there is no reason to be long. For buying and holding physical gold and silver, there are too many reasons not to be long. Plan accordingly.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://edgetraderplus.com/market-commentaries/gold-and-silver-is-the-golden-rule-broken
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So the question is, can gold can stay above its November low?
I am of the opinion it will and not simply because on November 7th I purchased a raft of gold mining stock. My impetus for going all in after saving my cash for many months was on the morning of November 7th, the spot price rose $30 at a steady pace.
I felt I had to get in because the spot price of gold was lower than it was in June 2013. In June 2013 Chinese citizens formed huge lines outside the doors of gold venders. Gold immediately spiked in price because no one wants to be holding a short position when hordes of buyers are lining up.
At what point will the Asians line up again? I’m betting it is just south of the November low. Further, I don’t think there are any short sellers with enough nerve to drive the price low enough where there is even an inkling of a chance of the Chinese floor materializing again.
Happy Thanksgiving Day to all those that celebrate it!
I believe that we are seeing a global effort to use paper trading (aka Naked Shorting) to move the PM prices downward which is allowing the really large investors and the Countries they control to acquire physical PM’s at low prices.
Lets use China as an example, they hold tons of Gold so they can easily use naked shorting, since if they get “caught” they can always simply give up some of their physical Gold. This allows them to use their physical PM’s as “leverage” to move PM’s to their own advantage.
In another example, they could decide to “dump” enough US$ to make up for any loses they have, which would then probably make the prices of PM go up (as compared to the US$).
Sooner or later, some combination of events will cause physical PM’s value to start increasing rapidly and when that happens all those still holding paper PM’s will be unhappy to say the least.