It could take many months — or even years — for the precious metals to form a bottom
I am on record as stating my opinion that the current down thrust in Gold, Silver and Platinum is likely to be the final leg down in their respective bear trends. If you inappropriately still own precious metals from higher prices, please do not take comfort from my belief we are headed for a low.
There is a huge difference between the end of a bear market and a bottom. Even if the precious metals find a final low, you could grow old and die before the next bull trend bails you out.
Let’s look at history.
The bottom in Gold following the 1974-1976 bear trend required 14 months to bottom. There was no reason to be a bottom picker during this bear trend.
The bottom in Gold following the 1980-1999 bear trend required more than five years to bottom. There was no urgency to pick the bottom of this 19-year bear trend.
Bottoms require time, especially in raw material commodities. SELDOM do raw materials create “V”-extended lows. Take a look at the current Gold chart. What possible reason is there to become a Gold bull even if a low might be near? Answer — ABSOLUTELY NO REASON!
Based on history, there is even less urgency to be an owner of Silver. It required 20 years for Silver to bottom after the 1979/1980 bull market, finally completing its bottom in 2005. I remember this well — I became a major bull in Silver in late 2005 based on classical charting principles.
When I think about Gold and Silver entering the final stages of their bear trends, my frame of reference is short covering, not trying to pick a bottom as a buyer. Even if the precious metal markets are in their final down thrust, it could be many months or even years before it is time to seriously become a bull again.
$GLD, $GC_F, $SI_F, $SLV, $PL_F
Gold, Palladium, Platinum, CATO, Crude Oil
Keep your eyes on the precious metals. Gold and Palladium could be bottoming. A decisive close by Gold above 1180 and then above 1202 would be strong indications that the 3+ year bear market has run its course.
Palladium is forming a 9-week H&S bottom pattern. The key levels to watch for the next direction are the Nov high at 809 and the Nov low at 746.25. More bearish is the Platinum chart. A new low under 1186 would not be constructive.
The weekly Crude Oil chart explains the current weakness. The 3-1/2 symmetrical triangle on the weekly chart has a target of $50. Look for real estate deals in North Dakota.
Kuddos to Factor member Paul S. for alerting me to CATO. On Tuesday he correctly interpreted the continuation H&S pattern in this stock and is profiting accordingly. Way to go, Paul.
Silver bulls may eventually be right, but they are still idiots.
By contrast, Gold bulls represent — by and large — a thoughtful group of folks.
As a trader and blogger, I love to have fun at the expense of Silver bulls. No other market I trade has a larger and more obsessed cult following of non-thinking and emotional “investors.”
I tend to be a Bayesian thinker. In my career as a trader dating back to 1976 I have found that most really good traders are Bayesian, whether they even know the term. No way could a logical Bayesian buy into the nonsense believed by Silver bulls. In mean, these are people who believe the Gold/Silver ratio should be 15 to 1 because it was so proclaimed by some Spanish king 500 years ago!
The daily and weekly graphs of Gold and Silver indicate that lower prices are most likely. Key chart levels are giving way, calling for a possible sharp drop from current prices. Let’s review these charts.
The weekly Gold chart is attempting to complete a 15+ month H&S failure pattern. A decisive close below 1240 will complete this chart configuration and indicate a possible target at low as 1040. HERESY! … the Gold bulls proclaim. It must be market manipulation — after all, the destiny for Gold is $5,000 per oz.
The weekly Silver chart is challenging the lower boundary of a descending triangle. A decisive completion of this pattern would indicate a target of 12.85. ABSOLUTE HERESY OF THE FIRST ORDER! THE GLOBE IS OFF ITS AXIS!!! This cannot happen. Impossible. After all, the cost of mining is $15 or $25 or whatever per oz. Let me say this once clearly for you Silver suckers — the cost of production means nothing. Who cares if small marginal cost-of-production miners shut down. It means nothing. It would take years and years of low prices for the big miners to shut down.
While the weekly and monthly charts are negative, Gold and Silver can be viewed from an ever larger historical perspective. Keep in mind, many a trader has gone broke with the correct longest-term historical perspectives. Historical perspectives are good for understanding, but not for timing investing and trading.
It can be argued that the longest-term trend is arguably up in Silver on the basis of this 100+ year chart.
Silver could drop all the way back to $6 to $8 and remain in a long-term bull trend. There is one other chart of Silver worthy of display — the price of Silver adjusted for inflation (i.e., purchasing power as a function of “fiat” money). On this chart we see that Silver is right in the middle of a 100-year trading range — and in fact, has spent many more years in the past century below the current price than above the current price.
The 200-year chart of Gold shows a different picture than that of Silver. Gold is in a genuine “for real” historic bull market.
There is a reason for the different “look” of the longest-term Silver and Gold charts — and you Silver bugs are not going to like what I say. Gold is a precious metal and store of value. Gold is actually a real investment medium. Silver is primarily an industrial metal (75% of annual Silver supply is off-taken for industrial uses). You can go ahead and argue with my statistic based on data provided to you in the latest report titled, “Why Silver Will Triple in Price in the Next Five Years,” published by some company that wants to charge you an arm and leg premium over spot prices to sell you coins from some “limited supply, one-time-only” Donald Duck release. But, my figure is right and their figure is wrong.
I actually believe in the long-term prospects for Gold. I think prudent people should be accumulating physical Gold during this bear market and sticking it in their safety-deposit boxes. As for Silver … no interest.
Please click here to read a copy of “The History of Gold Prices” updated late in 2013.
Markets: $GC_F, $GLD, $SI_F, $SLV, $GDX
Note: This perspective represents the type of analysis and thinking delivered on a regular and timely basis to members of the Factor email service. For information on this service, click the “Subscription” tab in the upper menu bar.
The following is the weekly Factor Update sent to members of the Factor service for the week of September 7, 2014. To become a member of the Factor service, click here for “Subscription Membership.” If the pdf is not visible below, click here.
Silver at 1304, Gold at 1075.
I know it is hard to believe. Personally, I am generally a Gold bull. I want the H&S bottom in Gold to complete, followed by a run to $2,000. But, a very bearish case can be made for the precious metals. First, the H&S bottom bullish case. The H&S pattern is a most reliable chart configuration — in fact, the most reliable of all classical chart patterns. A decisive close above 1,400 in Gold would be extremely constructive.
Yet, whenever a clear H&S pattern develops there is a possibility for a H&S failure. A close below the 1240 right shoulder low in Gold would be an indication that the H&S bottom is failing. The target would be 1074. A close below the late Jul low of 1281 would not be constructive — and, in fact, would suggests that the bears have control of the market. The market appears to be rolling over today. I will read a close below 1280 as a sell signal.
The same chart construction can be seen in $GDX, the gold miners ETF. A decisive close above 28.05 would complete the H&S bottom. A decisive close below 21.93 would complete the H&S failure.
Then there is Silver — which, in my opinion is not even a precious metal in the true sense. I am constantly amazed by the number of people who think t he world is running out of Silver. Might they have believed the world was running out of carbon-based energy 10 or 15 years ago? These people also believe that the Gold/Silver ratio should be 20 to 1 just because some king of Spain declared it to be so some 500 years ago. I have commented numerous times during 2014 that Silver could be forming a descending triangle formation. This pattern generally has bearish implications. The top completed in Silver in Apr 2013 established an yet unmet target of 16.70. A decisive close below 18.00 would extend the downward target to 1300.
$SLV, $SI_F, $GLD, $GC_F, $GDX
Gold is forming a possible massive H&S bottom
On Sunday, June 15, I issued a Tweet that Gold was forming a possible H&S bottom pattern. See here for chart posted.
Additional evidence exists that the precious metals are forming major chart bottoms that could propel the next bull market phase. To gain a fuller understanding of the importance of price charts in Gold, please read the “Chart History of the Gold Market,” last updated in November 2013.
The H&S bottom in Gold is now clearly defined on the daily and weekly charts (weekly chart shown). The rally today is strong indication that the right shoulder low is in place. A close above 1400 is required to complete this bottom.
In the event of such a close, the swing target in Gold would become 2,400 as shown on the monthly graph. This swing target assumes that the advance from the Dec 2013 low will equal the advance from late 2008 through Sept 2011. Remember, a H&S bottom is not a H&S bottom until it is completed.
Silver also presents an interesting technical study. The decline into the May low had all the earmarks of a bearish descending triangle. Yet, the market was on the ropes but could not be put down. While failed descending triangles are not typical bottom patterns, they do occur.
Also, it is possible to argue that the entire period since the Apr 2011 high has formed a channel on the semi-long monthly graph. On an arithmetic scale, the period since the Apr 2011 high has formed a bullish wedge.
The long-term chart of Platinum exhibits a possible 6-year triangulation as part of a bull trend that began in the last 1990’s. If this labeling is correct, Platinum’s target could extend toward 2,750. Obviously, this will not happen overnight.
Traders should be alert for buying opportunities consistent with their approach to trading.
Markets: $SLV, $GLD, $GC_F, $PL_F, $SI_F
Bear market in Silver may be entering its next (and final) down phase
Critics of price charting charge that charts only show for certain where a market has been. I completely agree. These charges are valid. Yet, understanding where market has been can provide historical context — and this historical context can be useful in anticipating the future.
With the above disclaimer in mind, let’s take a look at Silver’s chart history.
Firstly, the monthly price chart shows that Silver remains in a long-term bull trend from the 1932 low. Yet, long-term trends experience sudden and violent counter-trend reactions. Such was the case in the 1980 through 1993 decline during which Silver priced declined by 93%. Silver bulls should know they can go broke being right on the metal’s long-term direction.
The Silver market is currently undergoing another significant price correction, as shown on the weekly chart. This decline can be broken down into several classical chart configurations or phases.
Phase A was the blow-off exhaustion top experienced in April 2011. This blog correctly identified this as an important market top. See here (How do you spell bubble … SILVER, Apr. 24, 20111) and here (8 years of Silver supply changed hands last week, May 1, 2011). The blow off was immediately followed by a 35% price decline — with Silver bulls declaring a conspiracy.
Phase B was a retest of the top, taking the form of a bear wedge.
Phase C, lasting from October 2011 through April 2013, represented a rectangle. Phase D was a textbook horn or sloping top in the final stages of Phase C. It was during this horn, on February 20, 2013 that this blog carried a post titled “What’s happening to the metals – a chart update.” This post predicted a sharp decline in precious metals, specifically identifying a target of $1250 for Gold, the priced at $1570. The completion of the continuation rectangle in April 2013 set a still-unmet target of 1660. Remember, targets are not sacred. Also keep in mind that while I have made some insightful calls over the years, I also have many market pronouncements leading to a over-sized serving of humble pie.
Phase E has been the unfolding congestion since the June 2013 low. This congestion appears to be taking the form of a descending triangle with support in the 1800 to 1850 zone. Should this support give way, then the 1660 target would be quickly met, with a further target down to 1350.
Caveat: Under rare circumstances a descending triangle might be resolved by an upside pattern completion. As such, a close by Silver above 2250 would negate the descending triangle labeling.
$SI_F, $SLV, $SIVR, $GLD, $IAU
Note: This type of analysis is normally distributed only to members of the Factor subscription service (see navigation bar above).
The PDF below is an example of the correspondence sent weekly to members of the Factor Email Service. To receive information about the Factor Email Service, please send an email to:
- The subject line should read: Factor Service
If the PDF below does not appear, click here
[scribd id=207416514 key=key-wg86sti669zm4hh6g3a mode=scroll]
Markets: $SI_F, $GC_F, $SLV, $GLD, $USDMXN, $USDCAD, $GBPUSD, $AUDUSD, $CPST, $LIVE
Gold is the most reliable chart market in the world
And there is NO sign of a bottom
If you are unable to read the PDF below, click here
[scribd id=183670194 key=key-27uhhkrl4hdcnwi2es0n mode=scroll]
#GOLD, $GLD, $GC_F