Long-term double bottom scenarios-Gold and Silver

Let's discuss some long-term double-bottom scenarios. Having fallen for five weeks straight since the Trump victory, gold this week broke through its final technical support. This was of the 2016 advance. The 61.8% Fibonacci retracement is of the entire surge, at $1,173. So we must now shift our focus toward identifying the next low that is set to come. For the week, gold fell 1.4% to close at $1,159. This was of the final electronic trade in New York on Friday. The intermediate-term 3-year chart is the most helpful perspective at this juncture:   Two weeks ago, we highlighted the example of the 1999-2001 double bottom for gold. Also, we did look at how this might be the same pattern playing out again, 16 years later. Having seen the continued weakness in gold over the last two weeks, let us now focus on some additional specifics.

The 2013 - 2015 downtrend channel, seemingly forgotten last summer, is the next potential whereby gold should attempt to begin carving out a double bottom.

For reference, the channel was formed by five separate hits each on the upper and lower trendlines from 2013 onward. The channel is shown above by the red and orange highlight circles on the chart. It was as clear of a trend channel as we could ask for -- and it was broken in February 2016 as gold exceeded $1,190. Since then that trend channel was indeed declining. Even though gold has now come back below the $1,190 breakout point, the precious metal still finds itself above the upper boundary of the channel. Markets often come back to re-test broken lines and channels. In this case, the gold spot price looks to be setting up for that retest within the next 3-4 months. The retest of the trend channel should correspond, plus or minus a few percentage points, with the low for the 2015 bottom, at $1,045. Typically in long-term double base scenarios, the second low will fail to reach the depths of the initial low by several percentage points. Thus, our second-bottom potential exists from $1,045 through $1,080. Focus on the green band above. The possibility of a nominal new low in gold forming alongside a double bottom in the gold mining sector should also not be ruled out.

Silver Update: Long-term double bottom scenario

Silver finished the week positive for the second week in a row. It is up to $0.13 or 0.80% to close at $16.97 as of the last COMEX trade in New York. This was the second week in a row that silver spot price has moved in the opposite direction as gold when viewing the weekly closing prices. Silver outperformance should be noted to be a positive relative strength. However, there are ramifications for the entire sector. Fitting in with our thesis is that a complex long-term double bottom is forming in the precious metals, even if the absolute lows remain ahead of us. The rally this week was halted exactly at the broken support-turned-resistance zone shown below by the black line at $17.25. A break above this $17.25 resistance would hint that a short-term bottom is in the process of forming. We will feel much more comfortable when the significant decline is over. As well as when the upper blue downtrend line breaks. This now comes in at $18.45.

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 the pattern of- life mapping in Afghanistan and Iraq. Technical analysis shares many similarities with mapping: 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. He can identify both long-term market cycles and short-term opportunities for profit.