Louise Yamada - 3 Fantastic Gold, Silver & Mining Share Charts

Louise Yamada - 3 Fantastic Gold, Silver & Mining Share Charts

Gold Spot price (GOLDS-1,395.15, see Figure 19) retreated only toward 1,287 before establishing a rally that was eventually able to penetrate the declining 50-day MA as well as the short-term downtrend from the May rally to establish a higher low and the push through 1,345, which set in place the first higher high since September 2012, establishing the first uptrend.

Technical analysis historically cannot identify “V” bottoms since the evidence of accumulation is not present, and there is always the risk of another low.  The decline to 1,200 fulfilled the 50% retracement of the 2005 advance of 353%, and came close to the corresponding 2005 uptrend just below 1,200.

Price has now achieved / penetrated 1,400 briefly, our potential first target, at an initial price resistance.

The weekly momentum (see arrow) turned positive, and could support a further rally.  The monthly, more structural, reading remains negative.

The 1,400 level represented the first major resistance, but price could push further toward the declining 200-day MA near 1,500.  The 38.2% Fibonacci retracement of the decline comes in at 1,463; a full 50% Fibonacci retracement would suggest 1,550 as a possibility, were 1,463 achieved, carrying price back to the major April breakdown level (see horizontal line).  The longer-term downtrend intersects at 1,600.

Seasonality suggests the potential for a rally into fall for Gold.  But technically, a more extensive consolidation phase would be expected before the metal might rally sustainably.  Therefore we might anticipate a period of backing and filling over a period of months once the rally has run its course.  A current pullback could test the new uptrend at 1,340; next support 1,275.

Please reference last month’s piece for a more structural discussion on Gold.  Additionally, anecdotal evidence (from James Turk) contends that central banks dumped 1,300 tons of gold in a manipulated attempt to take gold price down and prevent an alternative to the growing fiat currencies; further that Shanghai data suggest that China is buying all the monthly production of Gold.  We may never know the truth on this.

Looking at the gold stocks through an ETF (see Figure 20), the GDX simply looks like a kickback rally into resistance, in need of much more repair after the tremendous decline from 65 to nearly 20.  “The bigger the drop, the longer the need for repair.”  Time is needed for that repair.

Silver Spot price (SILV-23.52, see Figure 21) joined Gold in a rally following a 63% decline.  Silver has managed to rally close to the breakdown level of 26-27 turning the weekly momentum positive (see arrow), but both price and the declining 200-day MA resistance may halt the progress at least over the short term.  The monthly momentum remains negative.

KWN Note:  Until further technical evidence suggests otherwise, Yamada believes the gold market remains bearish:  “... technical arguments thus far suggest Gold is simply experiencing a bear market rally.”  The same situation exists technically in the silver market according to Yamada:  “A trading range between 20 and 25 could develop as a period of repair for Silver in what currently represents a bear market rally.”