Gold and Silver updates
New
Intermediate Uptrend Signalled
Clive Maund
Archives
11 February, 2005
Yesterday
saw powerful breakouts by the precious metals stock indices and
silver, and although gold has not yet broken out, the action
in the stocks, which often lead gold, indicates that this can
be expected shortly.
When
the 200 support level broke on the HUI about a week ago it opened
up the risk of a more serious decline towards the big support
approaching the 150 - 160 area. The fact that this did not occur
and the index only declined by a modest amount was evidence of
the fact that sentiment in this sector had become so negative
that selling pressure had largely exhausted itself. What made
yesterday's advance so impressive was the that the index vaulted
above the 200 level, where one would have expected it to encounter
resistance, and then closed at the high, significantly above
it.
Moves
such as we saw yesterday are not common, and almost always signify
a trend reversal. Therefore, we will not be perturbed if prices
back off in coming days - on the contrary, this would provide
an excellent buying opportunity. Given the extent of yesterday's
move, and that it took prices into zones of some resistance,
and the fact that moving averages are falling, we should not
be surprised to see some reaction/consolidation before prices
press ahead. Investors and traders should use any such weakness
to accumulate the stronger stocks.
We
will now turn to look at some of yesterday's action in the gold,
silver and dollar charts. Starting with the 6-month chart for
gold, we see that although it advanced yesterday, it was not
exceptional and did not result in a breakout, although, as already
mentioned, the action in stocks indicates that this is to be
expected soon. A bullish development will be the break of the
downtrend channel line shown.
The
longer-term gold chart shows gold to be at an optimum buy spot,
just above its long-term uptrend channel line. The RSI and MACD
lines show it to be oversold with plenty of upside potential
and the chart also reveals that there is little overhead supply
to work off.
The
6-month dollar chart shows that the dollar has stalled at a resistance
level in the 85 area on the index, and is now not far below its
falling 200-day moving average.
The
longer-term dollar chart is interesting because it shows that
the dollar's countertrend rally has brought it up to make contact
with its long-term downtrend line - a good point for the uptrend
to end and the larger downtrend resume. An important point here
is that yesterday's action in the PM stocks indicates a new uptrend,
and the likelihood that the dollar is topping out now, and that,
even if it isn't, it hasn't got much further to go - no more
than 87 at maximum.
Silver
The silver chart is very impressive, a huge breakout yesterday
that does not look like some "flash in the pan" event.
Even if it backs off short-term, which is likely given the extent
of the move, it won't erase the bullish signal given by this
advance.
###
Clive Maund
Archives
Clive.Maund@t-online.de
Clive
Maund is an English technical analyst, holding a diploma from
the Society of Technical Analysts, Cambridge and living
in southern Bavaria, Germany.
Visit his subscription website at clivemaund.com.[You can subscribe
here].
No responsibility can be accepted for losses that may result
as a consequence of trading on the basis of this analysis.
Copyright
© 2003-2005 CliveMaund. All Rights Reserved.
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