Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold Shows Relative Strength, Especially Against the Silver Meltdown

Commodities / Gold and Silver 2011 May 08, 2011 - 09:53 AM GMT

By: Clive_Maund

Commodities

Best Financial Markets Analysis ArticleGold's reaction last week was quite modest, given what happened elsewhere, especially to silver, and with the benefit of hindsight it is quite clear that it was a good point for it to react as it had the Friday before risen to become critically overbought on its short-term oscillators.


On its 6-month chart we can see how, late the previous week, gold had risen to become critically overbought on its RSI, opening up a pretty large gap with its moving averages. It was thus a good time for it to react back and the severe reaction across the commodity sector last week, especially in silver, provided the perfect backdrop. As we can see this reaction was far less extreme than that which occurred in silver, and brought the price back in a fairly normal manner to support above its 50-day moving average. However, the four successive down days, which although more modest, mirror those in silver, are not viewed as normal and are not liked and are regarded as bearish in purport. Thus, while a rally back up looks likely soon, it is thought likely that it will be followed by renewed decline which will take the price below last week's low.

Last week's decline looks rather insignificant and is in fact barely visible on the 3-year chart, which underlines the point that gold has not been subject to the speculative ramp that silver has. While in one respect this is positive as it is a sign that gold has not become frothy, such a situation can precede a downturn as towards the end of an advancing phase in the Precious Metals the mob tend to pile into silver as they can't afford to drive a spike in gold. As we can see there is plenty of upside potential to the upper channel return line shown, which would result in substantial gains from the current price, but we should also note the potential bearish Rising Wedge that could become operative if the Fed refuses to refill the QE punchbowl in a timely manner, in an effort to sluice funds from commodities and stocks into the dollar and Treasuries.

Conclusion: an immediate or almost immediate relief rally in gold is expected that is likely to be followed by a drop below last week's lows, leading to a possible test of the trend channel lower boundary shown on the 3-year chart, which might fail if the Fed decides to pull the plug on the commodity markets, which it has an incentive to do. Even if it does gold is unlikely to fall as much as other commodities, and because we are deeper into the fiat endgame than was the case in 2008, it is unlikely to get hit as hard as it did then.

The dollar rally that we had expected and predicted over a week ago on the basis of the extremely negative public opinion on the dollar started with a big up day on Thursday, that was immediately followed on Friday by a breakout from the downtrend in force all this year. This rally could get as high as 79 on the index before it's done despite all the gloom and doom talk, which would clearly be likely to coincide with further weakness in the Precious Metals.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2011 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules