Even we are of the belief and opinion that silver will ultimately go much higher, but the key word is ultimately. For the present tense conditions, that is an unrealistic expectation. From this chart, we know silver is highly unlikely to rally to $100, $200, or $300. Actually, not even $50. Facts keep our beliefs in check and context.
If you want to know why the fundamentals and unprecedented demand for gold and silver has failed to follow the natural law of supply and demand, it is because both have been unnaturally treated by central bankers. The metals are anathema to the issuance of paper fiat, and competition must be eliminated, at all costs.
In short, we are pretty much back to where we were prior to the FOMC. This morning Fed governor Bullard managed to do what many in the Fed have been doing since May of this year, namely, jawboning the markets and setting them up for another possibility of tapering later this year. What has it been, 2 days since we got that FOMC press release and here we already are talking about starting the Tapering once again. Good grief!
In regards to gold, it is scooting higher as a large number of shorts were forced out with today’s surprise move by the Fed. It did take out that overhead resistance at $1330 which is a positive and is also now trading above $1350, another resistance level. There is $1360 which I am watching right above where it is currently trading to see how it handles that.
An unexpected and violent move started the trading day and week. Futures of most equity markets jumped more than 1% at the opening of the Asian trading sessions. It appeared “party time” for the markets. Gold and silver started slightly higher. However, as the trading session continued, all markets started moving south.
What else is needed to enhance the strong demand side of the market, and one that gets stronger with each passing month? Almost everyone is aware of the disappearing gold act sponsored [in stealth hiding] by the central bankers and abetted by lackey PM exchanges, COMEX and LBMA. Yet, on Thursday into Friday, there was another “take-down” in gold and silver futures. Where is all of this demand that is supposed to take price to elevated heights when it counts?
From a chart point of view, both gold and silver are back at their 50 day moving average, a key technical price point. In August, the precious metals had moved to their 200 day moving average but were not strong enough to hold that level. The odd thing about this price action is that the dollar is showing weakness as well in the last week. On the other hand, oil is holding up very well near a multi-year high.
For now, silver is in a small trading range, and $23 has held. This can change on Monday, if silver were to sell off under $23. We do not know, nor do we have to know. All anyone can do is deal with the available information in the present tense. If new, future market activity alters that view, we get to deal with it then, and respond accordingly.
It is not that the potential for much higher prices is unlikely or the messages are without merit. It is not as though we have not been drinking the same gold/silver Kool-Aid, for we bought gold over $1700 and silver over $45, [physical], and still own it, as well as still buying. No credit here for timing, on that score, although the buying was more than for price sensitivity. It was for the pragmatic purpose of actually having the metals, in hand, no matter where the price was.
After more than 6 months, sentiment towards gold (and silver) are back to neutral. Since mid February of this year, sentiment has crashed and remained near depressed levels. No surprise it had to do with a downward spiral in the gold price. The gold price is currently moving between its 50 and 200 day moving average.
In a week of no news relevant to gold and silver, gold slipped under the 1400 level, for some “unknown” reason, while silver just slipped a little. Friday marked the close of the week and month, for charting purposes. Stand-out wide range bars tend to capture market behavior for the next several time periods, so for a Quarterly, it can be a few years. In the 2011 wide range bar, gold traded sideways for 6 more quarters, before being “driven” lower. The 2nd Q bar, second from the end, is almost equal in size to the range that formed the high. Using past history of how price responds, it is likely that gold, [and silver], will move sideways for another year or two. This flies in the face of so many current, mostly expert opinions.
Silver prices are now at an inflection point that could be critical to the future direction of the precious metal. Prices ran into resistance near the 24.80 region which coincides with the highs seen in April of 2013. Support on silver is seen near the 10-day moving average near 23.65. A close below the 10-day moving average would likely lead to a test of the mid-August lows near 22.50. If prices are able to recapture the 25 per ounce level, the next likely test of resistance would be 28 per ounce.
Here we are talking about a nation that is running over $17 TRILLION in its national debt and there are those who are dense enough that they want to own more US Debt as a SAFE HAVEN. Gold has run into some pretty good selling at the highs made back in late May/early June after putting in some sizeable gains since Thursday of last week. Working against further gains in today’s session is the weakness in the mining shares.