…The paper markets…have had a surprising rally over the past month, one that has taken us by surprise, but we are not convinced it will continue. The only caveat in making that assessment is the fact that, at some point, gold and silver will not look back and will do nothing but accelerate in price. However, that condition should exhibit large upside movements and not the creeping, stair stepping fashion seen, of late.
The comments above & below are edited ([ ]) and abridged (…) excerpts from the original article by Michael Noonan (EdgeTraderPlus.com)
…It is crucial that ownership and possession of physical PMs is accomplished and the window continues to be closing fast as the movement toward a cashless financial system will make future purchases subject to government scrutiny. In addition:
- the insanity of all of the trillions of added debt,
- the unsustainability of the Western banking system,
- the failed public pensions waiting to blow-up in pensioner’s face and wallets
all beg for possessing gold and silver.
Owning physical gold and silver makes one impervious to any surprise runaway rallies, for one’s holdings will reflect any upside rising value. It may be more difficult for paper speculators to not be subject to surprise moves, up or down, and for that reason, we tend to be more cautious in interpreting developing market activity in the paper market. We are already prepared for any bull market by owning physical gold and silver, and we continue to advocate the same for anyone who has not yet purchased any, and for additional buying for those who have the financial wherewithal to do so…
Now to the charts:
Gold: Monthly Chart
The up slanting channel, starting from the Dec ’16 low, shows that the current rally has failed to reach the upper channel line drawn off the Feb high. The 1250+/- area also happens to be a 50% retracement from the July ’15 high to the Dec ’15 low.
In a downtrend, the 50% area tend to act as resistance. In an up trending market, a 50% retracement is often ignored. In the present case, it is having an effect against bulls, for now.
In addition to the stalled rally within the channel, the 50% retracement, price is failing to rally higher into the November wide range bar from the Election Week spill lower.
There was a 2 week decline starting at the end of February, and this reaction rally to the upside has not fully retraced that move after 3 weeks of trying and trying on increased volume. If the increased volume (i.e. buying effort) could not rally price above 1260, unless there is immediate upside follow-through, a correction lower to uncover more demand will follow.
When you look at the entire chart, from left to right, price is in the middle of a protracted Trading Range (TR). In the middle of a TR is where market information is at its lowest as to reliability.
For as bad as economics are with the world’s totally bankrupt banking system, and with as many countries facing deep financial problems…one would think gold would be responding with higher values, but the charts are not backing up that avenue of reality. The moneychangers still rule, but their days are numbered. We just do not have a number to identify as to when “the end is near.”
Gold: Weekly Chart
Gold: Daily Chart
The 1260 area is near-term resistance, and price was unable to penetrate it after 8 Trading Days (TDs), thus creating a short-term TR.
Silver: Monthly Chart
Bearish Spacing occurs when the last swing high, the lower horizontal line from 2013, fails to rally to the bottom, or higher, of the last swing low, the upper horizontal line from the 2012 swing lows. This leaving of a space is bearish because the market is telling us sellers did not bother to wait to see if the last swing low would be successfully retested. Instead, sellers resumed their selling campaign, confident lower prices will prevail. 25 – 26.25+/- remains strong resistance.
The 22+ area is current resistance on the monthly and quarterly. You can see how far price is away from even retesting a 50% retracement at the 31+ level. No matter what you hear or read, the chart in front of you is showing weakness, not strength. Take heed, in terms of expectations in time, for time still favors silver laboring near current lows.
Silver: Weekly Chart
In the chart below the high volume (circled) and the commensurate rally bar, (arrow pointing down) shows tremendous buying effort, but it was overwhelmed by sellers stopping the rally cold and preventing the range of that day from extending higher. It was then no surprise that a sell-off began right after. Again, this is how the market advertises participant’s behavior, and it is why we say we watch what the market says about the participants instead of what participants have to say about the market. The market is always the final arbiter. Count on it.
Silver: Daily Chart
Where gold was knocking on the 1260 resistance, in the chart below you see how silver was unable to even rally to its resistance line, moving sideways for the week well under that line.
If we look at these “messages from the market,” and shut out all that is being said and/or written about PMs, the message is clear. At this point, neither gold nor silver are in a position to initiate a substantial rally and, if proven wrong and the market takes off, those of us holding physical gold and silver will be quite delighted.