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Gold burst out of its pennant on Wednesday and closed three days in a row above the downtrend line, confirming its breakout for any remaining doubters out there. At $844.60, the yellow metal's high on Friday fell just shy of this bull run's twin peaks of $848 early last month.
Some resistance might be expected at that old high and the broken channel line slightly above it. It is unlikely that this resistance will detain gold for very long, since RSI is rising strongly, as is MACD -- which has made a bullish crossover, its first since late October. That was at much higher levels, however. This week's crossover more closely resembles the one in late August that marked the beginning of the bull run.
Silver, too, broke out of its flag on Wednesday, though not with quite as much exuberance as gold. The white metal returned to test the top of the channel on Thursday and found support near the Fibonacci level of $14.70 the next day. Recent resistance at the psychologically significant round number of $15 came into play Friday, as silver managed to touch $14.99 but closed a little below that at $14.90.
Next resistance lies at this bull run's closing high of $15.55 early last month. RSI is rising slowly, and MACD has made a bullish crossover.
The Fibonacci lines have been revised on the GDX chart after StockCharts.com adjusted historical prices for a dividend on Monday.
The gold-mining ETF broke through strong resistance at the Fibonacci 38.2% retracement level around $45 on Wednesday, tested support at that level on Thursday, and broke through resistance at its 50-day MA on Friday to close 26 cents above it.
RSI is convincingly above 50 for the first time in six weeks, and MACD is rising strongly after making a bullish crossover similar to the one in late August that coincided with the beginning of the bull run.
GDX could encounter some resistance at the Fibonacci 23.6% retracement level around $48, but after that it should be relatively plain sailing until the early-November high of $52.95 is tested.
The U.S. dollar index has declined dramatically after being rebuffed at the blue line -- the bottom of its long-term falling wedge. The index fell through support at its 50-day MA on Friday to close at 76.20, precisely on the neckline of the recent inverse head and shoulders.
RSI has fallen sharply through 50, and MACD is making a bearish crossover, so it is unlikely that support at current levels will hold for long. Next support is at last month's closing low, around 74.8, and last-ditch support is at the all-time low of 74.48.
The GDX:$GOLD ratio has broken out from its falling wedge, signifying that the gold-mining stocks are leading gold again, which is bullish for the sector. RSI is threatening to break above 50, and MACD has made a bullish crossover. The last time MACD did so at a similar level was in late August, at the start of the bull run.
While the GDX:$SPX ratio has yet to break out of its seven-week flag, RSI has broken sharply above 50, and MACD has made a bullish crossover, so it shouldn't be long before the breakout occurs. When it does happen, it would confirm that the gold-mining stocks have again begun to outperform the general market, which could draw more capital to the sector.
Support for gold at its 50-day MA and the bottom of the pennant has held during the past week. A breakout from the pennant -- a chart pattern that usually heralds a continuation of the prior trend -- is imminent as the price approaches the apex of the triangle. For clues to the direction of the breakout, we note that RSI is rising again from support at 50, and MACD is poised to make a bullish crossover.
Silver has been rising this past week within a downward-sloping channel and managed to pop above the 50-day MA on Friday. The metal will need to overcome some resistance at the Fibonacci line at $14.70 in order to break out of the channel. RSI has risen above 50, and MACD is poised to make a bullish crossover, so the chances of a breakout by silver look good.
As tax-loss selling wound down for the year, GDX gapped up on strong volume on Friday after making a low on Tuesday a little above its 200-day MA. The gold-mining ETF faces significant resistance at $46, which it will have to overcome before attempting to surmount its 50-day MA, currently at $47.24.
The period from now through February -- and sometimes beyond, as in 2006 -- is seasonally strong for gold-mining stocks. However, RSI, while rising, is still below 50, and MACD, while on its way to attempting a bullish crossover, isn't quite there yet, so some work remains to be done.
On the weekly chart, GDX appears to have successfully tested support at the top of the channel from which it broke out in September. RSI may be bouncing off 50, but MACD recently made a bearish crossover at a high level, so the indicators are mixed for the moment.
The U.S. dollar index closed right on its downward-sloping trend line on Friday after making several attempts to rise above it during the week. Will the index overcome resistance here and head for the long-term support, now resistance, at around 80? RSI is flattening out near 70, and the MACD histogram may be starting to turn down, suggesting that the dollar could fall back from these levels -- which would support a bullish scenario for gold.
The U.S. dollar index reached up to kiss the long-term trend line at 77.8 on Monday, fulfilling the projection of the inverse head and shoulders, before falling back to close nearly unchanged at 77.41. RSI is flattening out at overbought levels similar to those in mid-August that preceded the recent decline. Although MACD is still rising, its histogram is also relatively overbought.
After a few more attempts to continue its rally, the dollar is likely to be rebuffed by the trend line and resume its decline. Should it, however, succeed in breaking through, the index could rise to its 200-day MA, which is currently slightly above strong resistance at around 80.
Gold fell briefly below support at its 50-day MA on Monday but rebounded to close up $1.30 at $799.30, just under $800 -- which has been exerting a magnetic attraction on the yellow metal since the beginning of the month. While RSI is flattening out just below 50, MACD continues its decline.
Gold now lies within the lower boundary of what appears to be a pennant, which usually resolves in a continuation of the prior trend. Should support here fail, gold could test decent support at the Fibonacci 38.2% retracement level, around $773. Stronger support lies below that at around $750, the Fibonacci 50% retracement level.
Silver dipped as low as $13.74 on Monday but recovered to close unchanged at $13.98, well within the $14 support zone, which has held since the beginning of November. RSI is flattening out, but MACD continues to decline.
Should support here fail, silver could find a springboard at its 200-day MA, currently at $13.43.
GDX fell nearly 4% on Monday to close at $42.55, its lowest level in three months. RSI is falling toward 30, and MACD is declining rapidly.
The gold-mining ETF looks set to test support at its 200-day MA, currently at $41.84.
GDX has finally broken below the $46 support level, closing on Thursday one cent above the Nov. 19 low of $45.04. RSI has fallen away from 50, and MACD failed to make its bullish crossover -- which is bearish.
The gold-mining ETF may be heading toward a test of the early-October low of $42.87, or it might fall all the way to its 200-day MA, currently at $41.70.
$SILVER (Stockcharts is now using the March 2008 contract) closed on Thursday at $14.24, 10 cents below its 50-day MA. It is the first time the metal has closed below that moving average since early September. RSI has fallen through 50, and MACD has reversed to make a bearish crossover.
If nearby strong support at $14 is breached, silver could decline further to its 200-day MA, currently at $13.42, or the next Fibonacci support, just below that at $13.31.
Gold managed to close at $804 on Thursday, above the strong support around $800. While RSI remains above 50, MACD has failed in its attempt to make a bullish crossover -- which is bearish. If $800 gives way, next support is at the 50-day MA, currently just above $790.
The U.S. dollar index closed at 76.57 on Thursday, just below its 50-day MA. RSI and MACD are both rising. If closing prices are used, the inverse head and shoulders projects a target in the vicinity of the falling long-term trend line, near the Fibonacci resistance around 77.6.
Should the dollar rise that far, the price of gold may be expected to drop significantly.
The U.S. dollar index was rebuffed at 76.82 by its falling 50-day MA on Thursday, then closed just above support provided by the neckline of the inverse head and shoulders on Friday.
If the dollar bounces here, there's a good chance it will plow through the 50-day MA to at least the next resistance at 77.66. Should the index fall through the neckline, however, that would negate the inverse head and shoulders, and a resumption of the dollar's decline would be likely.
On the weekly chart, RSI has climbed above 30, and the MACD histogram is threatening to cross above zero, indicating more strength to come in the dollar.
Silver found support again near its rising 50-day MA on Thursday but was repelled at the Fibonacci level of $14.70 on Friday. Although RSI is falling back toward 50, the MACD histogram has been rising gradually, so there is no clear indication of the direction of silver's next move.
Meanwhile gold has been hovering around $800 for several days, and RSI is threatening to fall through 50. If support around $800 fails to hold, gold could retest its 50-day MA, currently at $784.84, or the Fibonacci 38.2% retracement level at $773. Overhead resistance at the broken trendline lies just above $820.
Looking beyond the end of this year, JPMorgan expects the price of gold to average $815 in 2008, as precious metals outperform other commodities owing to weakness in the dollar. The bank said:
We still expect the $850 major highs to be broken and a run up to around $900 to be seen before we start to look for signs of a significant top, which is in-line with our USD view.
The U.S. dollar index reversed smartly on Wednesday to the tune of 0.82 of a point, or 1.09%, completing an asymmetrical but otherwise well-formed inverse head and shoulders. The dollar now seems ready for the sizable rally we had been expecting before its temporary weakness this week.
RSI has crossed back up above 50, and MACD is continuing its climb.
If the support holds on any pullback to the neckline at about 76.17, there is a good chance the index could clear initial resistance offered by the 50-day MA (currently at 76.85) on its way to the measured target of 77.86. That target happens to lie in the vicinity of the Fibonacci line at 77.66 and the longstanding downward-sloping trendline.
Such a scenario would, of course, curtail any hope of an immediate recovery in the price of gold.
The U.S. dollar failed to follow through on last week's rally, encountering resistance at prior highs around 76.2. The index closed at 75.68 on Tuesday, more than a point below its 50-day MA, from which it parted company three months ago.
RSI has been repelled at the 50 mark, and the MACD histogram has flattened out, so the dollar appears to be ready to resume its decline after its brief, shallow bounce.
Moving inversely to the dollar, February gold bounced off support near its 50-day MA on Monday and retook the $800 level to close at $807.60 on Tuesday.
RSI has bounced off the 50 mark, and the MACD histogram is turning upward, but gold's broken uptrend line may offer resistance not far above.
The old resistance at $14 has again provided support for silver, as has its 50-day MA. RSI is peeking above 50, and the MACD histogram has begun to turn upward.
GDX appears to be trapped between support around $46 and its 50-day MA above, currently at $47.24. A breakout from this range could result in a significant move. RSI, which continues to hover around 50, offers no clues to the direction of that move, nor does the MACD histogram, which is essentially flat.
A couple of Canadian portfolio managers have been banging the drum for the junior gold miners, which they see as cheap. Sprott Asset Management's John Embry told The Gold Report:
now I think the gold, the junior golds in particular, are pretty well sold out. I think most of the people who were sort of “weak handsers,” as I would call them, probably have discarded them. The vast majority of people who have owned these things own them because they know why they own them.
And so, I think it’s much less likely [that the junior golds will be thrown out with the other stocks in a general market meltdown]. There will be some general weakness, but nothing like we experienced in August. My goodness! That was awful.
And Otto Spork, who manages the Sextant Strategic Opportunities Hedge Fund, is quoted in the Globe and Mail as saying:
"We are looking to buy on this weakness. We feel that certainly the junior gold and other resource stocks are nowhere reflecting their true value."
Spork says he expects gold to reach US$1,500 -- and silver, $35 to $40 an ounce -- within the next two years.
Gold burst out of its pennant on Wednesday and closed three days in a row above the downtrend line, confirming its breakout for any remaining doubters out there. At $844.60, the yellow metal's high on Friday fell just shy of this bull run's twin peaks of $848 early last month.
Silver, too, broke out of its flag on Wednesday, though not with quite as much exuberance as gold. The white metal returned to test the top of the channel on Thursday and found support near the Fibonacci level of $14.70 the next day. Recent resistance at the psychologically significant round number of $15 came into play Friday, as silver managed to touch $14.99 but closed a little below that at $14.90.
The Fibonacci lines have been revised on the GDX chart after StockCharts.com adjusted historical prices for a dividend on Monday.
The U.S. dollar index has declined dramatically after being rebuffed at the blue line -- the bottom of its long-term falling wedge. The index fell through support at its 50-day MA on Friday to close at 76.20, precisely on the neckline of the recent inverse head and shoulders.
The GDX:$GOLD ratio has broken out from its falling wedge, signifying that the gold-mining stocks are leading gold again, which is bullish for the sector. RSI is threatening to break above 50, and MACD has made a bullish crossover. The last time MACD did so at a similar level was in late August, at the start of the bull run.
While the GDX:$SPX ratio has yet to break out of its seven-week flag, RSI has broken sharply above 50, and MACD has made a bullish crossover, so it shouldn't be long before the breakout occurs. When it does happen, it would confirm that the gold-mining stocks have again begun to outperform the general market, which could draw more capital to the sector.
