Gold & Silver: "Buy Rumors, Sell Facts"?

When there is something turbulent happening in the world, investors buy the dollar as a safe haven. However, when there is uncertainty in the United States itself, as we have been observing recently with the situation around the 2020 election, money shifts to a universal shelter to precious metals such as gold and silver.

One should be careful these days, as we need to remember the old trading wisdom, which says buy rumors, sell facts. The Results of this election finally came out, catching traders out of access to the market on the weekend. This could be a good lesson to keep away during such a major event such as this US presidential election as volatility spikes dramatically as well as investors' emotions, and only a deep "pocket" could survive then.

Gold Chart

Gold was up and down with huge moves in both directions last week. It finished the period on the upbeat, as investors were puzzled with uncertainty over election results. The move-up was strong as the price quickly broke $1900 and gained $84 from $1876 to $1960 at the top. Some profit-taking then followed as the week ended lower at $1952.

The market closed in the dark, and the results were out later. I guess the opposite price action could happen then on the market, as it tends to "sell facts." It goes in line with the map that I shared with you last month. We got the move down and then the move up to complete the counter-trend consolidation, which links the second and third legs down. The latter could start soon, or maybe even before this update will be posted. The round number $1800 mark could be tagged then.

They say a picture's worth a thousand words. For that reason, I highlighted the similar consolidation that emerged a year ago for you in red, and it had three visible legs down. I projected the same scenario on the current consolidation for clear visualization.

From the seasonal point of view, this extension of the current consolidation looks natural as the takeoff run before the possible traditional Santa Claus Rally.

Silver Chart

Silver shows the same behavior as gold, but its chart structure is clearer as we are still in the same orange downtrend channel. The zigzag move has emerged as it was mapped previously, although the last move up was slightly higher, making an up-sloping counter-trend consolidation. It almost touched the upside of the channel last Friday.

The expected "sell facts" related move down is expected here either, and the downside of the channel could be touched then in the $19.30 area. The third leg down should at least retest the former valley of $21.67.

I cut the excess from the chart to focus on the move up and the current consolidation, which could hit the 50-61.8% Fibonacci retracement levels between $20.8 and $18.6. This would create an effect of a compressed spring, which then could catapult the price much higher. That is why I removed the old target to see if we will dip one more time to find the new point of growth and the new target accordingly.

Will precious metals face "sell facts" move down?

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Intelligent trades!

Aibek Burabayev
INO.com Contributor, Metals

Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

6 thoughts on “Gold & Silver: "Buy Rumors, Sell Facts"?

  1. I WOULD SAY THAT, BECAUSE TWO OR MORE COUNTRIES (CENTRAL BANKS) HAVE BECOME NET SELLERS OVER THE
    PAST 2 MONTHS, WE COULD SEE MORE DOWNTURN IN THE PRICES. WHEN ANY LG. AMOUNTS ARE SOLD IT CAN TEMPORAILY KILL THE PRICES. THE SELLING COULD CONTINUE DUE TO THE PANDEMEMIC.
    CHINA AND RUSSIA HAVEN'T BOUGHT ANY IN 2020, AS IN 2019 THEY ADDED >100tons EACH.
    TURKEY SOLD OFF(22tons) AND UZBEKISTAN SOLD (35tons).
    ANOTHE NOTE IS THAT TURKEYS GOLD PRODUCTION IS EXPECTED TO INCREASE BY 44% THIS YEAR.

  2. I think the $1,850 level in gold will hold. Silver...not sure where that will go. Maybe we'll see another leg lower. Silver should see the bigger move up though, as it has two tailwinds. 1) low interest rates and currency devaluation (same for either a Biden or Trump win) and 2) Biden is big on green energy; silver is used in solar panels.

    1. Dear Ed,
      Thank you for the active and regular feedback.
      I wouldn’t be so sure about $1850 to be the bottom in gold as this could be only the first minor leg of large leg #3. Let the market take its time to release emotional reaction fully.
      The silver is losing as well. Structurally silver has a big potential, agree, thank you for #2 heads up, it was worth to mention. My only concern is the ratio as gold is gonna win back against the silver as per my chart outlook.
      Best wishes, Aibek

      1. Dear Aibek
        Inspite of many ups and down you have been very bullish on silver.Though you expected correction now and then but did not hesitate.Is it due to easy money.
        It reminds me the era in 1980 when huntley bros. made history in silver.
        Now after the changed scenario you have changed your opinion .Is it due to stimulus package uncertainty or ruling elite.

        1. Dear Girraj Sharan Bansal,
          Thank you for sharing your thoughts. I am not sure about what change you are talking about as
          market moves as planned within the zigzag posted earlier at https://www.ino.com/blog/2020/10/the-king-requires-respect/
          This post was meant to warn readers ahead, but the market moved much faster as it did the same before my earlier post called “Too good to be true” at https://wwwtest.ino.com/blog/2020/09/gold-silver-too-good-to-be-true/
          Best wishes, Aibek

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