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Tuesday, April 2, 2013

Gold and Silver charts: bears back on top

Gold Chart Pattern

Gold_Apr0213

In a post two weeks ago, the following were the concluding remarks: “Gold’s price may try to move above its 50 day EMA towards the 200 day EMA. Bears are likely to use the opportunity to sell.” The selling began even before gold’s price could reach its falling 50 day EMA. Strong volumes on down days do not augur well for the bulls.

A brief flirtation with bankruptcy by the island nation of Cyprus had caused a mini rally in gold’s price. EU troubleshooters cobbled together a bail-out package and the rally fizzled out. With stock markets in Europe and USA showing continued strength, investors are focussing on risky assets.

Daily technical indicators are beginning to look bearish. MACD is above its signal line, but has stopped rising and remains in negative territory. RSI has slipped below its 50% level. Slow stochastic has dropped from its overbought zone, and is drifting down towards its 50% level. Gold’s price is trading below its three EMAs and is in a bear market. Rallies may be used for selling.

In longer-term weekly chart (not shown), gold’s price is trading above its rising 200 week EMA. The long-term bull market is still intact. However, the 20 week EMA has crossed below the 50 week EMA for the first time in 3 years. That is a bearish sign.

Silver Chart Pattern

Silver_Apr0213

Two weeks ago, silver’s price was consolidating within a narrow range in a bear market. The following were the concluding remarks: “Expect some more consolidation before silver’s price can break out of its narrow range between 28.25 and 29.50.” 

A rectangular consolidation pattern is usually a continuation pattern. So, it wasn’t a surprise that silver’s price broke downwards – since the price was falling before it entered the consolidation range. What is ominous for bulls is the strong volumes on down days.

However, all three daily technical indicators – though bearish – are showing positive divergences by touching higher bottoms while silver’s price dropped lower. That could lead to an upward bounce.

In longer-term weekly chart (not shown), silver’s price is barely above its 200 week EMA. The longer-term bull market is under threat. However, a bounce from the 200 week EMA is a possibility.

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