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Silver Miners, Gold Miners and the Price Of Gold

Silver and silver mining stocks are front and center for investors and active traders. Because of silvers high volatility (large price swings) it naturally attracts a lot of attention.

First you have seasoned investors who are waiting for the right opportunity to get long or short for the next move. Then you have the active traders playing the day to day price swings. Finally you get the gamblers who are salivating over the potential to double their accounts and are riding the commodity on pure emotions (Fear & Greed). All these things compound the volatility for the investment making it headline news and what everyone wants to be involved in.

The focus of this report is show you where the price of gold, silver and miner stocks are currently trading and what to lookout for in the coming days/weeks. Below is a chart of gold but silver has a similar pattern and will follow or should I say lead the price of gold in percentage terms because of its volatility.

Gold Weekly Chart:

Gold has been testing its long term support level for three weeks. I expect we see price start to move quickly sooner than later but there is potential for it to tread water here until the second half of April. We all know the saying “Sell in May and Go Away” and as we get closer to that date we should start to see money flow into the “Safe Havens” being gold, silver, and miners. While this has not happened many times on the charts I am thinking beyond them and of what the masses are likely to flock to when stocks lose their luster.

Also if you have been following the price of the dollar index you know that its getting a little overbought and when it starts to correct the falling dollar should help send precious metals higher.

Gold3

Gold & Silver Miners VS Gold Bullion Performance:

The stock market has certain chart patterns that tell chart readers what the holders of that particular investment is feeling emotionally. Knowing how to read these extreme patterns can yield some big gains and works for most investments types (stocks, bonds, commodities and currencies).

Without getting into the boring technical details precious metal stocks are starting show signs of panic selling which typically happens before a major bottom is put in place. A bottom generally takes a week or two for some type of bottoming pattern or base building to form. This is the most volatile time to be trading these investments so trade with caution.

Gold1

 

Gold Miners Bullish Percent Index:

Bullish percent indexes are a great way to see how popular an investment is. If you do not know what a bullish percent chart is then you can look it up online and learn more. The way I read it is when it’s up over 75-80 it’s a popular investment and everyone is buying it. It also means it’s in a major uptrend. But you must be aware that when everyone is buying something once price starts to turn down you better be one of the first few out the door before everyone else runs for the door and price crashes.

It’s similar but reversed for investments that are below 20. Everyone is selling, no one wants to own it but once the selling momentum stops price should rebound and rally. Keep in mind this indicator is not great for timing, but confirms that what you are looking at is either oversold, neutral or overbought in the BIG picture.

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Weekend Precious Metals Trading Conclusion:

In short, I still like gold, silver, and their related mining stocks. I am watching them very closely for signs of a bottom and will be jumping on that train when the selling momentum looks to have stalled. Keep in mind that all these investments are still in a VERY STRONG DOWN TREND and trying to catch a falling knife is not what I do. Waiting for momentum to shift is my focus as there should be big upside if metals and stocks can find a bottom soon. If gold breaks down below key support as posted on the weekly chart then the uptrend may be over and it will be time to start looking for short positions.

You can get my free weekly reports and ideas here: www.GoldAndOilGuy.com

Chris Vermeulen

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Silver at Multi-Month High

The price of silver reached a 5-month high this past week as investor interest seems to have been rekindled in both gold and silver as belief in financial markets increases that the latest round of monetary easing from the Federal Reserve – QE3 – will soon be on its way. Many investors had largely stayed away from silver in recent months after some had got caught up in its volatility. Silver had touched a 30-year high in April 2011 before plunging 35 percent in a few short weeks.

Now the volatility is back – but on the upside – as prices have climbed more than 20 percent in less than a month. The gains have outpaced that of gold which rose roughly 10 percent during the same time frame. Importantly for investors, the ratio between the two precious metals has moved about 10 percent in silver’s favor since mid-August. This is the first time silver has outperformed gold since the start of 2012.

For non-futures investors, the two precious metals can easily be tracked through the use of exchange traded funds (ETFs). The most liquid ETFs for the two precious metals are the iShares Silver Trust (NYSE Arca: SLV) and the SPDR Gold Shares (NYSE Arca: GLD) respectively.

Silver Bullion Spot Price

Gold Bullion Spot Price

You can take a look at my long term outlook analysis from last week here: http://www.thetechnicaltraders.com/gold-standard-to-be-reinstated-through-the-back-door/

Some may wonder why has silver outperformed gold in the past several weeks? The answer goes deeper than just confidence that QE3 is coming soon, but it is still rather a simple one. The sharp rally in silver was fueled largely by short-covering. That is, some investors (hedge funds, etc.) had made rather large bets that silver would continue falling and were caught off-guard by its recent rise. According to data from the Commodities Futures Trading Commission, the silver market during the week of August 27-31 saw the largest amount of short-covering since May 2011. At the same time. Bloomberg reported that hedge funds were the least bullish on silver in almost four years.

It is unknown for how long silver will outperform gold. But even some long-term fundamental investors such as legendary commodities investor Jim Rogers has said that he believes silver right now is a better investment than gold. He points to the fact that historically gold has been worth about 12 to 15 times what silver is worth, but that recently it has been worth roughly 50 times silver’s value. Silver is also the only major commodity not to have reached a new all-time high in the decade-long commodity bull market and is still cheaper than it was 32 years ago.

So it may be worth a look. But since silver is so volatile, wait for a downward spike before initiating or adding to a long position.

If you would like to get my weekly analysis on precious metals
and the board market join my free newsletter at www.TheGoldAndOilGuy.com

Chris Vermeulen

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What To Expect in the Final Week Of February for Precious Metals, Gold Stocks & Dollar

This morning we are seeing the US Dollar index move higher retesting a short term breakdown resistance level. What this means is that the dollar fell below support and is not slowing drifting back up to test the breakdown level. As we all know once a support level is broken it then becomes resistance. So if that holds true with the current move in the dollar we should see stocks and commodities find a short term bottom and continue higher today or tomorrow from the looks of things.

Gold has been pulling back the past couple trading session on light volume which healthy price action. It has done the opposite of what the dollar did above. Gold broke through a key resistance level and is slowly drifting back down to test the breakout level to see if it is support. If so then gold should continue higher in the coming days.

 

Both silver and gold miner stocks are lagging he price of gold. They have yet to break through their key resistance levels. That being said it could happen an day now as they have both been flirting with that level for a couple trading sessions now.

 

Crude oil continues to hold up strong and is headed straight for its key resistance levels without any real pullback. Chasing price action like this is not something do often because risk: reward is not in your favor. I am staying on the sidelines for oil until I see a setup that has more potential and less risk.

The equities market remains in a strong uptrend at this time. I do feel a 1-3 weeks pause/pullback could take place at any time but in the grand scheme of things we could be only half way through this runaway stock market rally as noted in the video.

The equities market is going to gap down this morning which is typical in a bull market. Remember. in an uptrend the stock market tends to gap lower at the open and close higher into the close. And it’s the opposite in a down trend with stocks gapping higher and sell off through the trading session.

Watch my detailed video analysis for this week: http://www.thetechnicaltraders.com/ETF-trading-videos/

Chris Vermeulen
www.TheGoldAndOilGuy.com

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Monday Jan 12 – Precious Metals & Oil Update

Special Swing Trading Report on Gold, Silver & Oil – CLICK HERE

PRECIOUS METALS

February gold closed higher on Friday as it consolidated some of this week’s decline. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If February extends this week’s decline, trendline support drawn off the November-December lows crossing near 804.60 is the next downside target. Closes above the 10-day moving average crossing at 865.50 would signal that a low has been posted. First resistance is last Monday’s high crossing at 892.00. Second resistance is October’s high crossing at 938.80. First
support is Wednesday’s low crossing at 836.00. Second support is trading line support crossing near 804.60.

March silver closed higher on Friday due to short covering as it consolidates above the 10-day moving average. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI are neutral to bearish signaling that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 10.908 are needed to confirm that a short-term top has been posted. If March extends the rally off October’s low, the reaction high crossing at 12.230 is the next upside target. First resistance is Monday’s high crossing at 11.770. Second resistance is the reaction high crossing at 12.230. First support is the 20-day moving average crossing at 10.908. Second support is Monday’s low crossing at 10.570. 

ENERGY MARKET
February crude oil closed lower on Friday as it extended Thursday’s breakout below the 10-day moving average crossing at 42.98. Today’s low-range close sets the stage for a steady opening on Monday. The door is open for additional weakness and a possible test of last week’s low. Closes below last Wednesday’s low crossing at 36.94 would temper the near-term friendly outlook in the market. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near-term. If February renews the rally off December’s low, the reaction high crossing at 52.95 is the next upside target. First resistance is the 20-day moving average crossing at 43.34. Second resistance is Tuesday’s high crossing at 50.47. First support is today’s low crossing at 39.38. Second support is last Wednesday’s low crossing at 36.94.