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Gold – False breakout?
Gold Spot price (latest: $1293.33) experienced a false short-term breakout through the April 2014 peak at 1,327, and promptly fell back into the narrow trading range of the past 4 months (see Figure 22 left). In failing, Gold put in place a third lower rally peak since 2013 (see red arcs) suggesting there is not yet enough demand to get through those resistance levels. Each lower rally peak suggests someone coming in to sell the rally.
Similarly, however, following the May false breakdown and June recovery, there has also not been enough supply to carry price lower than the 1,272 low of the four-month trading range.
The false breakdowns and breakouts suggest indecision. Therefore, we would await a sustained penetration of either the resistance at 1,327 or the support at 1,280 to indicate the potential for a more tradable trend. All of this price behavior is still taking place within the wider, more important trading range in place since May 2013 between 1,200 and 1,400 (to 1,420).
Breaching either of these levels would be a more important indication of the next sustainable direction than that of the narrower range discussed above, which might offer a trading opportunity, but not necessarily a sustainable trend.
Looking at the longer-term profile of Gold (see Figure 22, right), one can note that Gold is trending toward, hovering near, the very important level of the 2005 long-term uptrend, representing the bull market for Gold (up 648% from 2005-2011). The intersect of this critical uptrend comes in now at the important support level of 1,200. A breach of this support / uptrend would bode ill for Gold and could suggest a further slip toward 1,150-1,000. The monthly momentum is still negative but close to a potential Buy signal, which might not come into play without price exceeding the 1,400 level. Gold is still neutral.
There is a lot of excitement over the perceived “bottom” in the gold stocks, and some have indeed lifted from bases S but not all. If we use the Market Vectors Gold Miners ETF (see Figure 23, GDX) there is a case that can be made for a basing formation that would allow a rally to the downtrend.
But technically, this is still a rather neutral trend, without yet a higher high in place. There is also the possibility, as for Gold, that the support could become vulnerable again. We prefer to await the proof of new demand and see the pattern complete, either as a base, or as additional distribution.
Silver Spot price (latest: $20.32) also failed in its rally to overcome the prior rally peak at 22 from February and now has short-term support at the MAs at 20.26 and 20. A penetration of either level could suggest the next direction.
Platinum Spot price (latest: $1464.13) has been inching along in an uptrend for the year, concentrating in the upper half of the wider neutral trading range above 1,400. Price addressed resistance at 1,500-1,550, also the intersect with the 2011 downtrend (see circle). Penetrating these levels would suggest continuation of the advance. A breach of the 2014 uptrend, now being tested, and the MAs at 1,435, would suggest renewed weakness.
Palladium Spot price (latest: $864.85) only briefly consolidated the breakout through 800 before extending the advance through the 2011 high (see Figure 25), leaving only the 2001 high near 1,125 outstanding. The four-year breakout suggests there should be further gains ahead and the monthly momentum is on a Buy signal (see arrow) confirming that probability. Price could advance eventually to challenge the old high. Supports come in at 850 and 800, near the 2009 uptrend, for any potential pullback.
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