Dollar Index, Gold And Silver Updates

The market moves in zigzags and not in a straight line as it takes a break from time to time to accumulate enough power to continue with the trend. In my post last week, I mentioned the US dollar index (DXY) as one of the drivers of the precious metals rally. This time I would like to share the daily chart of it below as I spotted a reversal signal there, which could affect precious metals.

Dollar Index

The DXY price was rejected right at the contact point with the downside of the red downtrend channel. The price tried that support twice on the 31st of July and the 6th of August but failed to break below. This, again and again, demonstrates the power of simple trend channels.

The other move was very sharp to the downside within two equal zigzags pushing the price from 100.9 to 92.5. The DXY was oversold, and now it could enter the retracement stage to let traders book some profit covering shorts, and contrarian traders might enter longs here playing on the trendline rejection. The price could touch the opposite side of the trend channel around 96 as this could be not a minor, but a large corrective structure as we saw such last time only this April. Continue reading "Dollar Index, Gold And Silver Updates"

Gold & Silver: The Volcano Awoke

Before we get down to the charts, let's look around to see what pushed the precious metals higher as gold posted a new all-time high last Friday at $1985, just shy of the next thousand. The silver price more than doubled since its severe crash in March. Indeed, the precious metals "volcano" awoke erupting its power on fiat, which has been printed heavily. I warned about this trigger in my April post called "Gold Could Fly Over A Helicopter Throwing Money". More than three months have passed since then, why "volcano" erupted only now?

Among the reasons, an escalating trade war and the COVID-19 pandemics. It's all about the relationship between the two largest economies and the health of each of them. US gross domestic product fell at an annualized rate of 33% in the second quarter, said the Commerce Department last Thursday. It's the largest fall on record dating back to the 1940s. The hope for a quick rebound is escaping as economists don't see the recovery to the prior peak until 2022. This contrasts with a V-shaped rebound of the Chinese economy, which showed 3.2% growth in the second quarter after a -6.8% crash in the first one. But that is not enough to restart the global economy as each player matters.

I guess the main driver for the sharp rally of the top metals was the smell of a possible cold war or even a real military collision between the US and China, that appeared recently. I hope it won't happen, but investors are hesitant to bet when this turmoil will end, so they rush to the safe-haven metals to wait through this uncertainty. At the same time, the US dollar index has been sold off dropping from its multi-decade peak at 104 that was hit in March down to the current 93 level. The nearest support is located at 88, the valley that was established in February of 2018. This leaves the room for the top metals to grow even more.

Let's get down to the updated charts, and the daily gold chart will be the first. Continue reading "Gold & Silver: The Volcano Awoke"

Precious Metals Warn Of Increased Volatility

Are the precious metals patterns predicting a big downside price event?

Our trading team witnessed a big drop in Platinum and Palladium prices early this morning while Gold and Silver continued to push moderately higher. We began to question this move and investigate any historical relevance to previous patterns. Our research team pointed out that both Platinum and Palladium rolled lower just 3 to 4 days before the breakdown in the US stock markets on February 24, 2020, while Gold and Silver were reaching recent price peaks. Could the patterns in precious metals be a warning of another potential volatility spike and price decline in the near future?

Our research team created the charts below to help highlight the pattern that we are seeing in Precious Metals right now. First, we highlighted February 24, 2020, with a light blue vertical line to more clearly illustrate where the markets initiated the COVID-19 breakdown event. Next, we drew shaded rectangles around new downside price rotation levels that took place near this peak in the US stock markets. Lastly, we drew a red line that highlights the subsequent price decline that took place in Precious Metals as the markets tanked in late February and early March 2020.

Precious Metals

The current downside price move in Platinum and Palladium are very interesting because it appears Platinum and Palladium both initiated a downside/contraction price event just 3 to 4 days before Gold and Silver, as well as the rest of the US stock market, began to collapse on February 25, 2020. You can clearly see in the bottom two charts that Platinum and Palladium initiated a downside price correction a few days before both Gold and Silver reached their peak levels and began to move lower. Once this peak rotation took place, all four of the major metals groups moved moderately lower for about 7 days before pausing, then collapsed even further. Continue reading "Precious Metals Warn Of Increased Volatility"

Gold And Silver Could Diverge

At the beginning of this month, I shared a warning alert as the silver chart had a Bearish divergence. The trigger was set below 50 on the RSI. It wasn’t activated, and gold and silver moved higher. Moreover, silver finally hits the target. The majority of readers kept a bullish outlook and got it right.

I prepared an update for you with the bonus chart at the end, so stay tuned.

Let’s start with the daily gold chart.

Gold Chart

Gold is slowly moving to the upside. It hasn’t shown any bearish signs as of yet. The metal finally elevated above the top of the preceding large consolidation beyond $1766 (black dashed line), eliminating the option of another leg down within an even more extended consolidation. Continue reading "Gold And Silver Could Diverge"

"Diamond" Pattern Pushed Gold To Sky Vs. Silver

I appreciate active readers of the Blog for leaving valuable comments on Gold and Silver posts. Recently, there have been a lot of thoughts shared not only about the metals itself but also about its relationship reflected in the dynamics of the Gold/Silver ratio. I think it’s time to talk about it in this post. Please feel free to enrich this piece with your valuable thoughts in the comments section.

Back in December 2014, I shared only the third post here on the Blog. The title was more appropriate for a science fiction novel as it promised the “journey to the Moon” for the Gold/Silver ratio as it was going to hit the 109 ounces. Below is that very chart from the distant 2014 to refresh the memory.

gold silver

The idea was based on the “Diamond” pattern spotted on the monthly chart (blue). The target was reached more than five years later on the 16th of March this year. The total gain is equal to 109 - 72 = 37 troy ounces of silver per troy ounce of gold or 51% in five years.

Let’s see in the weekly chart below the ratio dynamics after that post. Continue reading ""Diamond" Pattern Pushed Gold To Sky Vs. Silver"