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Tuesday, January 17, 2012

Gold and Silver Chart Patterns: an update

Gold Chart Pattern

Gold_Jan1712

Two weeks back, gold’s price was making a second attempt at a pullback towards its 200 day SMA from below. It was expected that the bears would resort to selling and push the price down once more. But after a bit of a struggle, the price crossed above the still-rising 200 day SMA and has stayed above it since then.

Technically, the support at 1550 was not broken – gold’s price only had a day’s close below the support level. So, the drop from 1900 to 1550 should be treated as a bull market correction. The 30 day and 60 day SMAs (not shown in chart) did not fall below the 200 day SMA. Once the 14 day SMA crosses above the long-term moving average, the bulls will regain control.

Gold’s chart appears to be forming a bullish ‘falling wedge’ pattern, which is a ‘continuation’ pattern from which the likely break out should be upwards. Please remember that technical analysis is not a science, and patterns don’t always play out as expected. Buy on a convincing rise above 1700.

Silver Chart Pattern

Silver_Jan1712

Despite a smart pullback above the 14 day SMA, silver’s price is trading below its 30 day and 60 day SMAs (not shown in chart) and well below the 200 day SMA – the hallmark of a bear market.

The white metal is falling within a downward-sloping channel, making a bearish pattern of lower tops and lower bottoms. The 200 day SMA is forming a ‘rounding top’ pattern, hinting at a further fall in silver’s price.

3 comments:

Titu said...

Hello Sir,

Govt. has increased import duty by 2% on gold, I think which will only increase the gap in international price and domastic prices, or will it change the demand supply equation? (low import & comparatively high demand)
and push the gold price up.

-Titu

Subhankar said...

Good point, Titu.

India imports a lot of gold. If the increase in import duty leads to a slow down in import, international prices may fall and Indian prices may rise.

If there is no slowdown in import, the government will make more money from the higher duty!

Subhankar said...

An immediate reaction to the import duty hike:

http://in.finance.yahoo.com/news/gold-import-duty-hike-stalls-090158576.html