Gold & Silver Price Downtrend

Gold closes higher by $14 (1.2%) to finish at $1,268 for the week. The precious metal is now close enough to its fundamental long-term 2011-2017 downtrend. We can again call this advance another attempt to overcome the critical level. Tune here for gold & silver price updates.

The last effort for this trend came on April 17 at $1,290 per ounce.

It is a level that exceeds a few hours. Then fails to hold throughout the overnight trading hours. TAs the trend line is downward sloping. At the same time, the level to overcome inherently is falling every week. Thus shifting our focus to the $1,280 level. This shows below by the most recent arrow. It is just above that long-term (magenta color) trendline. 

We have stated in the past that our target upon a successful breakout will be $330 above or below the apex of the consolidation. This is $1,205. Thus, either $1,535 or $875 within 6-12 months of the breaking point.

We will have much more analysis on what short-term swings to expect within.

This significant movement of the break of the pattern finally happens. For now, let us continue to focus on the pattern’s resolution itself. The $1,280 figure would require at this juncture.

Scenario

The most probable scenario we see is that the gold price again fails to break out this week. It continues to grind in the low-mid $1,200’s through Q3. This should be the final exhaustive consolidation to wear out the last remnants of the “hot money.” Meaning those in the sector only after 2016’s first-half surge.

Of course, at our firm, we are already primarily invested. That is because in a bull market surprises should be expected to the upside. A breakout sooner – perhaps by mid-summer – rather than later in the year.

While in the midst of a lengthy consolidation it is difficult to imagine that anything else will ever occur. Frustration grows as the sector oscillates without much definitive movement. This is precisely the time to go against the herd and not succumb to such a limited perspective.

The price action that occurs after a consolidation breaks will have little resemblance to the price action within the consolidation itself. This is one of the most explicit consolidation patterns we have ever observed in the gold market. Let us remain alert.

Silver

The technical action in silver is encouraging for the entire sector. Gold’s cousin rose $0.53  (3.1%) to close at $17.32. This was the final trade on the New York COMEX on Friday. The rising trendline gained successfully. We can now call the last portion of silver’s plunge into early May below $16.50 a “false breakdown.” This shows on the chart.

There is minor resistance at $17.75. It may halt the current advance.  Although if and when gold breaks its first consolidation, silver should rise with strength such that it may just ignore most of the previous short-term resistance levels. These levels are visible on the chart above. On a successful gold breakout, momentum indicators and leading signals from the silver mining complex will be more important. They are for gauging the next target of an average high.

To the downside, we would see a break of support at $15.75. This is a major red flag that the expected bull market advance may delay beyond 2018.

Longer-term, however, the clarity of silver’s basing pattern could not be more apparent. Silver prices are now beginning their fifth year below the $25/oz region. Downward momentum is exhausted. This is mainly after the 73% drop from 2011  to 2015. The longer that prices remain in this basing pattern, the stronger that the move higher will eventually be once $25 breaches. We must remember that at each swing higher and lower within a basing pattern, metal transfers from weak hands to strong.

Our general expectation is that silver may continue with this basing process with an upward bias through mid-2018.

Christopher Aaron,
Bullion Exchanges Market Analyst

Christopher Aaron has been trading in the commodity and financial markets since the early 2000s. He began his career as an intelligence analyst for the Central Intelligence Agency. The CIA is where he specialized in the creation and interpretation of pattern-of-life mapping.

Technical analysis shares many similarities with mapping. They both base on the observations of repeating and embedded patterns in human nature.

His strategy of blending behavioral and technical analysis has helped him and his clients. It has helped to identify both long-term market cycles and short-term opportunities for profit.

This article is a third-party analysis. It does not necessarily match the views of Bullion Exchanges. Readers should consider it as financial advice in any way.