Gold review

Here are some updates to the gold charts we've been looking at over the past few months. I will not recapitulate all the salient points mentioned in the original posts, but I will provide links.

Our first chart is gold's 144-day moving average (blue line, dotted) and the regression line thereof (brown). Keep in mind that in exactly 10 trading days (Aug 1), the relatively low prices of the January 2011 correction (yellow arrow) will start dropping out of the 144-day MA. Of course, as smaller values drop out, the moving average will have a lot of upwards thrust, especially if gold continues its strong ascent over the next two weeks. That's why it's good news for gold bulls that the 144-day MA is still below the brown line. In 2 weeks, the 144-day MA should be around $1465-$1470, which isn't really much above the brown line, so we wouldn't need a big pullback to take it back there. But I'd still watch out for a pullback anyway at that point, since big corrections have often come around 144 days apart. So, we may, sometime in August, go all the way back down to the 144-day MA, say to $1500, which we clearly didn't do during the latest correction (missing it by ~2%). But, I'd say that although it felt mild, we did indeed experience a bona fide correction that ended July 4, judging by the fact that we went below the 40 day exponential moving average (see here) and also judging by all the other times the RSI got below 40 (see yellow horizontal line on below chart).

Next is my most recent weekly gold chart. We're right at $1590, but unfortunately it looks like we didn't quite make it over the thin blue line, such that it wouldn't be unprecedented to still test the lower black line again. (The point being, if gold finishes a week above the thin blue line, and doesn't continue all the way to the upper black line, then that would be a first since 2009). Let's see if we can make it over the line next week. Btw, if we hit the upper black line in the next month, that would mean $1650-$1750 gold.

Here's the chart with the two "natural" bounds for gold since the 2008 collapse, namely the 144-day MA on the downside, and the 5% upper envelope of the 20-day exponential moving average on the upside. We're still a good $30 away from the upper envelope, and in ~5 trading days, the low values of the July 4 correction will drop out (pushing the upper envelope even higher, ceteris paribus) (though it won't make such a big difference because the EMA is weighted towards recent price action), but we could easily be at $1650 before we need to worry about hitting it (which would signal an impending steep pullback, if history holds).

Now gold in euros from a few weeks ago. The yellow arrow points to where the bottom of the blue trend channel meets the red/green horizontal line; I suspected that would be strong support, and it was. Gold in euros looks to be on its way to the top of the blue trend channel now, which would be something to behold. But it probably needs to take a breather.

Same with gold in AUD. I had posted two charts, one 3 year and one 6 year. In both, the lower trend lines held beautifully as support, and it looks like we're headed to the dotted lines on both charts, again after a short-term breather.

Finally, the silver weekly (see here and here). The last time we checked in, we were right at the 34-week moving average (pink dotted line) ... and it was not to be broken. We're now firmly back in the blue trend channel, and the 34-week moving average has entered it. That's good news for silver bulls.


nashnas said...

Hi Jenkins

I have sold gold @1493 during last week’s correction and of course troubled now with soaring market prices. Kindly guide me
1. is there any possibility of retracement towards 1490 area or at least 1500-1510?

2. If not what should be my future strategy to get rid of the short sell safely

Your advice is awaited and would be highly appreciated

thanks and regards

GM Jenkins said...

nashnas - my guess is no better than anyone else's but what would i do? i wouldn't get in here because even if it pops up, it's highly unlikely that it won't eventually come back down to this level, and you'd be better off buying as it tests support around here. On the other hand, if gold were to have some big down days this week, say fall 5%, I'd get back in without trying to get cute and time perfectly. I agree with what Ben Davies said in a kwn inteview, that you just gotta "bite the bullet" and be in gold right now, because there's just so much potential for some major geopolitical game changer. i took some profits yesteday and will be looking to buy out of the money puts, though.

GM Jenkins said...

ah i see you sold short. well my advice doesnt change really. maybe buy some way out of the money calls to protect against an explosion, but again i see it dropping 3-5% sometime in the future, i dont think we've seen the last of the low 1500's, but perhaps we have seen the last of the 1400's. but again, with this stuff i'm only right when i'm not wrong and vice versa. good luck

Robert LeRoy Parker said...

Great update GM. Thanks.

It is very interesting to me that the pattern of silver coming out of backwardation coinciding with a price jump appears to be repeating.

Victor highlighted this very well and I think he is on to something legitimate. I just wish those damn bullion banks were more transparent!

Here are the current charts from Market Curiosity highlighting the phenomenon.

Victor if you are reading this, are you ready to expound on your theory any further yet?

p.s. Wynter Benton is full of phony baloney cacamamie grade A horsedung!

nashnas said...

Thanks but gimme a clear picture plz. shall i wait holding and what level is i can safely cut my short positions at???

GM Jenkins said...

LOL nashnas, come on now. If I knew exactly what was going to happen, I wouldn't be writing this blog. I'd be snorting coke off a strippers ass in a yacht off the Seychelles.

as i said, i think you should be patient because now would be a bad time to close your short position in my opinion; even if we shoot up to $1700, we'll probably come back down to where we are now again anyway, but it's more likely $1600-$1620 proves to be strong reisstance, and you'll have a chance to buy back in the low-to-mid 1500's within the next month. i wouldn't try to profit on your position, though, if that's what you're asking, but that's me - I don't know your risk appetite, the size of your position, your net worth (maybe you're asking me these questions from a yacht off the seychelles, and your punting with the tip money for the strippers). Anyway, I don't think massive currency collapse and hyperinflation is right around the corner such that you should cut your losses immediately or have reason to panic.

nashnas said...

oh GM
am certainly not the one holidaying in Seychelles. Its only 2 lots (24 ounces) am holding! though means a lot for me as i have lost considerable amount during last 7 months of gold trading (am kinda beginner).
Just need to know if a considerable correction is on way or not or a technical opinion may be!!! thats it!