Gold & Silver: Silver Hits Support As Gold Cracks Consolidation

Aibek Burabayev - INO.com Contributor - Metals


The recent collapse of the top precious metals shouldn't be a surprise if you read my previous Gold & Silver update in November, where I called for the upcoming “storm” after the “calm.” In this post, I’ll share with you the updated charts of both metals.

I changed the order of the charts, and this time I would start with silver as it reached the first decision point ahead of gold.

Chart 1. Silver Daily: First Target Reached

Daily Silver Chart (XAGUSDO)
Chart courtesy of tradingview.com

Silver has a strong bearish structure as the red long-term trendline keeps the pressure on silver. The second leg of consolidation within the black parallel channel lacked power as the price couldn’t reach even the top of the first leg established in October at the $17.47 per oz. It stalled at the $17.39 per oz. and then collapsed for more than a half of a dollar to check the consolidation support. Continue reading "Gold & Silver: Silver Hits Support As Gold Cracks Consolidation"

Gold & Silver: The Calm Before The Storm

Aibek Burabayev - INO.com Contributor - Metals


In September I warned you about the possible weakness in both gold and silver after a good rally as strong reverse signals appeared on the chart. That warning alert paid well as the metals dropped heavily – gold lost more than 7%, and silver fell more than 10%. I hope it helped those of you who had market exposure that time.

There are updated charts below with further price action forecast, which is based on pattern recognition and market staging approach. I hope my detailed graphs with annotations will help you understand market behavior, training your eyes to recognize patterns and determine market stages with me.

Chart 1. Gold Daily: The Baby Bird Could Fall Out Of The Nest

Gold Chart
Chart courtesy of tradingview.com

In the previous gold chart I put two zigzags to show you possible paths for further price action, the red zigzag was the main option, it showed the downside move with a small consolidation inside. In reality, the drop has been even sharper with just a minor correction within. Continue reading "Gold & Silver: The Calm Before The Storm"

Commodities: Time For A Strategy Shift

Lior Alkalay - INO.com Contributor


Commodity prices are facing a shift. As inflation heats up and growth stabilizes, the commodity arena is gradually tilting in favor of growth-oriented commodities such as Oil and Copper Meanwhile, commodities associated with inflation protection, e.g., Gold and Silver, are not only losing their allure but face growing sell pressure.

The thought of selling precious metals just as inflation is showing signs of coming back may sound counter-intuitive. After all, precious metals are one of the more well-known methods of hedging against inflation. So, why are precious metals tanking just as inflation is coming back?

Because the capacity of precious metals as an inflation protection method emerges when investors believe that inflation is understated in the official numbers. When inflation becomes fact, we begin to see the classic, "buy on rumor, sell on fact" response; i.e., investors start selling precious metals. Since Gold and Silver do not pay interest, their investment appeal decreases when rates rise. But, when inflation is under-reported, effective rates are lower and the value of the currency, in our case the Dollar, is eroded. And, in this case, precious metals gain appeal for preserving value and as an alternative investment. That would explain Gold’s price surge from July $1,210 an ounce in July to $1,350 in September, when US headline inflation numbers caught the market off guard with a fall to from 2.7% in February to 1.6% in June, meaning inflation was understated.

This dynamic also explains the fire sale that hit precious metals in the aftermath of the Fed's September rate decision. The Fed signaled a rate hike as soon as December and another three in 2018. Gold responded by shedding 3.6% in two weeks.

Gold
Chart courtesy of MarketClub.com

All the while, the rest of the commodities space was holding rather well in the face of higher rates. In fact, in aggregate, excluding precious metals, commodities prices were gaining. One good example is the iShares S&P GSCI Commodity-Indexed Trust ETF (GSG), which embodies exposure to the broad commodities market from energy and agriculture to precious metals and gained 0.54% during Gold's selloff. Continue reading "Commodities: Time For A Strategy Shift"

Gold Update: Triangular Consolidation

Aibek Burabayev - INO.com Contributor - Metals


In the previous Gold & Silver update I warned you about the possible correction ahead. Indeed, both top metals showed weakness, but I didn’t think it would be that severe as we quickly reached seemingly distant supports both in gold and silver. Later I shared with you my concerns about golds outlook as the Fed starts cutting its massive balance sheet this month. This could be a real game changer as market wizards call for another perfect storm for the financial markets. In the charts below I try to model this change for you.

I would like to start with the U.S. 10-year Treasury notes (UST) chart as this instrument has a strong relationship with gold, which I already showed you in August.

Chart 1. U.S. 10-year Treasury Notes Daily: Bear Flag Works Out

U.S. 10-year Treasury Notes Daily
Chart courtesy of tradingview.com

Above is an updated and zoomed in chart from my last post. I chose a daily time frame to focus on the tactical move to see how the chart structure of the instrument develops over the time. Continue reading "Gold Update: Triangular Consolidation"

Fed Takes On Gold Unintentionally

Aibek Burabayev - INO.com Contributor - Metals


In my previous Gold & Silver post published earlier this month, I promised to update a long-term chart of Gold as I observed some interesting price behavior in a related instrument. But before I do that, let me speak about the Fed’s decision last Wednesday and that “related to gold” instrument first.

The positive dynamics of the US economy underpinned the Fed’s decision to finally start to trim its huge balance sheet next month, besides that there is a big chance of another rate hike this December. It wasn’t a shock to the market, and some big players already started their game weeks before the Fed moved from rhetoric to action.

The Fed’s decision could have a double impact on US interest rates as falling US Treasury notes increase the yields, and the impending rate hike could secure that situation. I was writing about the high possibility of this almost a month ago and last Wednesday we received a first-hand confirmation from the Fed. Continue reading "Fed Takes On Gold Unintentionally"