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There is a potential for gold to be forming a bottom, based on the explanation provided
on the chart below, but there are a few steps that must be met before anyone can say, “The bottom is in.” If these simple but important steps are not met, then there is the likelihood that yet another low can occur.
The above introductory comments are edited excerpts from an article* by Michael Noonan (edgetraderplus.com) entitled Gold And Silver – Wall Street, aka United States, Pulls Off Another Destructive Coup.
Noonan goes on to say in further edited excerpts:
Gold just took a turn for the positive, at least for now, when last week’s rally went above the broken support of the 1180 area and held…[That being said,] unless a bottom has been confirmed, and none has since the highs of a few years ago, then we get to deal with what is. Unlike Clinton who said, “It
depends on what the definition of ‘is’ is,” our definition is confirmation.
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Gold: Weekly Chart
There is a potential for gold to be forming a bottom, based on the explanation provided on the chart below (ironically, “ESF” on the chart refers to the Exchange Stabilization Fund) where you continue to see a series of lower highs and lower lows, but we have yet to see any definition that incorporates that kind of activity to define an up trend. The current rally in gold has not yet surpassed the mid-October swing high.
Gold: Daily Chart
In order to say the daily trend is up (which may not necessarily change the higher time frame weekly chart) gold needs to:
- demonstrate stronger EUM (Ease of Upward Movement), evidenced by:
- wider range bars with strong closes and
- increased volume (Part 1)
- and see a market correction that shows a weak reaction in the form of:
- smaller ranges,
- positive closes, and
- decreased volume, indicating selling has dried up (Part 2).
Part 2 is what confirms Part 1 that enables one to say with more authority that a trend change has taken place.
If the Part 2 correction:
- takes the form of wide range bars (showing ease of movement),
- closes on the lower part of the range, and
- increased volume,
either
- a new low can occur,
- or it is a sign that price has more work to do before turning stronger,
and being long could prove costly.
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Silver: Weekly Chart
Despite silver’s chart structure being much weaker than gold’s, and it requiring a lot more
effort to change its down trend, silver has been performing slightly better than gold, using
the gold/silver ratio as a gauge. It is presently just under 72:1 where in recent weeks it
had been consistently running between 73:1 and 75:1. With that observation, nothing much further can be added until the chart structure improves.
The immediate band of resistance from October will provide important feedback by the manner in which silver negotiates it. A strong rally above 18, followed by a weak correction would go a long way to improve the odds favorably for silver. Until some more visible sign(s) of strength enters this market, it will continue to meander.
Beyond the chart reads, we remain staunch advocates for buying and holding either or both metals.
Conclusion
The insanity of ongoing central bank suppression of gold and silver to levels that defy the unprecedented demand world-wide will come to an end, which always comes back to the “When” factor. When it happens and not a day before, is the best answer we know.
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-wall-street-aka-united-states-pulls-off-another-destructive-coup
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