Gold bounced around in the range defined by the 20 DMA at the top and the 50 DMA at the bottom yesterday, as the "summer doldrums" type trading continues.  This is typified by choppy sideways trading with a downwards bias and narrow trading ranges and is usually seen in July/August as the markets wind down for the holiday season.

The market is well supported around 1287-1292 on the down side - a break of this level will see an escalation in the decline with 1274 our initial target.

The dollar strength continues, with the rally taking the dollar well above 81, this is bearish for gold and is a major factor in the recent price weakness.  Equities near to all time highs add to the overall bearish picture for gold.

Today may see quiet trading leading up to the FOMC interest rate decision in the US at 7pm UK time - any hint of an imminent rate rise will see gold under more pressure and the dollar rally extend further.

Support can be found at 1299-1301, 1292, 1285-1287, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - a failure to break the 65 week MA would make this much more likely.

Resistance can be found at 1310, 1318-1322, 1325-1326, 1333-1335, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We appear to be witnessing a second failure to break through the key 65 week MA - this would suggest that the intermediate down trend is intact and a retest of 1240 and possibly 1180 is likely.

Today's video for subscribers looks at the rcent trading in more detail and our strategy for our next trade.

Gold & Silver Trading Alert originally published on July 28th, 2014 9:19 AM by sunshineprofits.com

Briefly: In our opinion (half) speculative short positions in gold, silver and mining stocks are now justified from the risk/reward perspective. Gold and the rest of the precious metals market moved higher on Friday and the volume was not low. It was lower (for the GLD ETF) than what we had seen during Thursday’s decline, so there are some bearish implications. But are they really that important? Let’s take a closer look (charts courtesy of http://stockcharts.com). 

The very short-term trend remains down (based on July highs), so we can’t say that a lot changed. The analysis of price and volume provides us with bearish implications even though the last move was down. The GLD ETF closed slightly below the 300-day moving average (spot gold closed above it). Gold is declining also today – clearly the short-term trend remains down.

From the long-term perspective – and comparing gold’s performance to that of the bond market – the situation remains bearish.

Gold is already very close to its previous lows. It would now take only a little more weakness for gold to break below them, which would likely start a sizable downswing.

In the case of mining stocks, the short-term trend is more horizontal, but it’s still pointing downward. The volume here was a bit higher on Friday than during the previous daily decline, and it’s a bullish sign. If miners continue to show strength, it might suggest that we will see another rally before a bigger decline.

The situation on the USD Index chart is bullish, but we see some caution signs as well. The RSI indicator is above the 70 level, which has previously meant that a local top would be seen shortly. In fact, it was the proximity of this level that was followed by declines, and at this time the U.S. currency is even more overbought – it’s more overbought than it’s been in a year. What we wrote previously about the possible implications remains up-to-date:

We could see a pause here, but we could also see another visible move higher followed by a correction close to the cyclical turning point (meaning in a week or so).

On a different note, we have quite a few new subscribers that joined us recently (thank you), so we think that emphasizing our overall approach toward the gold and silver markets is in order, especially given that we have been bearish on this sector for many months (more or less since April 2013 after being medium-term bullish for years, with only minor exceptions).

In other words, we are gold fans, but not fanatics. We don't act in the best interest of gold or silver producing companies. We act in your best interest. We are neither permabulls nor permabears. We don't believe blindly in gold or any other asset class. We are not against any particular asset class either. We strive to look at the world in the most unbiased way possible (please note that we don't accept any advertising on our website in order to prevent any conflict of interest), then combine it with our experience in the precious metals market, trading in general and all other linked areas, and provide the outcome of our analysis to you - our subscribers and readers - in order to make your investments and trades more profitable and to help you grow money over time.

At this time, based on the analysis of various fundamental factors including the low interest rates and Quantitative Easing programs, we think that gold and silver are poised to move higher in the coming years. However, markets are only logical and do what they are "supposed to do" in the long run (counting in years, not months or days). We also realize that markets don't move in one way only - at times even the markets with the most favorable outlook have to correct or decline. In the medium term and especially in the short and very short term, markets are not logical, but emotional. They are also vulnerable to big entities moving the market with sudden sales of assets. Did the fundamental situation change for gold in 2008? No, but it declined very significantly nonetheless. It moved back up and rallied much above the previous high, but not before declining sharply and significantly.

At this time, even though we like gold and silver as very long-term investments, we don't think that the medium-term decline is already over. We like gold, but based on the information that we have available today, it seems likely to us that it will need to move even lower before it starts its next big upswing.

Summing up, it seems to us that the situation in the precious metals market remains bearish, but it improved a bit based on Friday’s session. While the USD Index is visibly above the June high, gold is not below its June low. This strength could be meaningful, or it could be the case that the metals’ reaction is just delayed. Please note that the major breakdown in the Euro Index has just materialized and it’s quite likely to impact the precious metals market negatively in the coming weeks and months. The short-term outlook for the USD Index is rather mixed. The medium-term trend is down, but the currency is strongly overbought in the short term and the turning point is just around the corner.

While we continue to think that the medium-term trend remains down for gold, silver and mining stocks, the odds for a move higher in the coming days somewhat increased based on the sector’s strength on Friday and the overbought situation in the USD Index. It seems to us that decreasing the size of the short position (at this time the silver market provided the biggest gains) in the sector is now justified from the risk/reward perspective.

To summarize:



Trading capital (our opinion): Short (half) position in gold, silver and mining stocks with the following stop-loss levels:



Gold: $1,353

Silver: $21.73

GDX ETF: $28.30



Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position



You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As always, we'll keep our subscribers updated should our views on the market change. We will continue to send them our Gold & Silver Trading Alerts on each trading day and we will send additional ones whenever appropriate. If you'd like to receive them, please subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com

Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

After short covering on Friday took gold up as high as 1308, with traders concerned about the escalating conflict in Gaza looking to avoid holding short positions over the weekend, gold is on the slide again this morning.

The yellow metal is currently trading at 1303 and the short term downtrend is clear, with a well defined pattern of lower lows and lower highs.  The dollar continues to move higher, trading well above 81, and equities remain near all time highs.  Until we see a significant correction in equities, coupled with dollar weakness, we will not see a major rally in gold.

Traders will be eyeing the conflict in Gaza this week, though any movements in reaction to events will be short term and temporary.

Support can be found at 1299-1301, 1292, 1285-1287, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - a failure to break the 65 week MA would make this much more likely.

Resistance can be found at 1310, 1318-1322, 1325-1326, 1333-1335, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We appear to be wtinessing a second failure to break through the key 65 week MA - this would suggest that the intermediate down trend is intact and a retest of 1240 and possibly 1180 is likely.

Today's video for subscribers looks at the recent trading in more detail and our strategy for our next trade.

Briefly: In our opinion (full) speculative short positions in gold, silver and mining stocks are now justified from the risk/reward perspective. The Euro Index broke decisively below the rising long-term support line (based on the 2012 and mid-2013 bottoms) and this is a major event not only for the currency itself, but also for the precious metals sector. Let’s see why (charts courtesy of http://stockcharts.com).

It was only a few months ago that the Euro Index invalidated a breakout above the very long-term resistance line, and at that time it was likely that the next big move would be to the downside. However, as long as the rising support line remained unbroken, there was still a significant possibility that the currency would move higher. This month and – in particular – this week this changed. We saw a key breakdown. Of course, as it is always the case with long-term charts, we would like to see a confirmation in the form of at least a weekly close below the broken line, but it’s already likely that we will see it.

The situation has deteriorated and it will deteriorate further each day the Euro Index remains below the rising support/resistance line.

Why is this breakdown so significant? In short, because previous similar breakdowns led to massive declines in the value of the European currency (and in other currency markets) and they were also followed by huge declines in the precious metals market. These implications are of medium-term nature, so we may not see the reaction on the very next day, but it’s likely to be seen this or next month.

Meanwhile, not much changed from the long-term perspective, so today we’ll focus on the short-term one. On the above chart you can see that we have just seen another sell signal from the Stochastic indicator. These signals were quite useful in the previous months, so it seems to us that paying attention to it is useful also at this time.

We would like to once again emphasize the fact that even though gold rallied last week, it hasn’t moved above the 61.8% Fibonacci retracement level, which suggests that the move was just a counter-trend correction, nothing more. Please note that we can say the same about the June – July rally – it was a correction of the March – June decline.

The situation in silver, mining stocks and the USD index didn’t change yesterday, so our previous comments remain up-to-date.

Summing up, the outlook for the precious metals sector remains bearish.



To summarize:



Trading capital (our opinion): Short (full) position in gold, silver and mining stocks with the following stop-loss levels:



Gold: $1,353

Silver: $21.73

GDX ETF: $28.30



Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position



You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As always, we'll keep our subscribers updated should our views on the market change. We will continue to send them our Gold & Silver Trading Alerts on each trading day and we will send additional ones whenever appropriate. If you'd like to receive them, please subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com

Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Briefly: In our opinion (full) speculative short positions in gold, silver and mining stocks are now justified from the risk/reward perspective.

In our yesterday’s second alert we wrote that yesterday’s rally was quite likely to be a one-time event and that it didn’t change the overall trend, which remained down. The reason was that the rally was clearly event-driven and not a reflection of the change in the attitudes of investors and traders. Based on today’s pre-market decline, it seems that we were correct. Let’s take a closer look at yesterday’s changes (charts courtesy of http://stockcharts.com). 

From the long-term perspective, we see that the previous breakout has been more than invalidated and that yesterday’s session didn’t really change anything. The bearish implications remain in place. 

On the above chart, we see that the GLD ETF is now once again above the 300-day moving average, which seems bullish at the first sight. In our opinion, however, what happened yesterday didn’t reflect the investors’ true attitude or its change, so we don’t think we should take this strength at face value. In yesterday’s second alert we emphasized the following:

These are the moves that at times simply have to happen and are one of the reasons for which we usually need to wait for confirmations of a given move. It seems that any breakout / that happened today should be treated seriously only if they are confirmed in the coming days.

We expect the strength to be proved temporary shortly, and today’s session is a good start toward this outcome.

Additionally, please note that the high volume that accompanied the decline earlier this week was significant and it seems to us that it was a sign that showed the real direction in which the gold market is heading.

The situation in silver didn’t change a lot yesterday, and it continues to support the bearish outlook. Having said that, let’s take a look at what changed in the case of mining stocks.

In general, what we wrote regarding the GLD ETF applies also to the situation on the GDX ETF chart. In the case of GLD, we were discussing a move above the 300-day moving average, and in this case we are discussing a move above the declining support/resistance line. Again, it seems too early to say that anything has really changed.

Before summarizing, let’s take a look at the forex market, specifically at the Euro Index.

Our most recent comments on the above chart remain up-to-date (which is another way to say that yesterday’s session didn’t change anything from this perspective and the implications remain in place):

There are 2 things on the above chart that are significant for precious metals investors. Firstly, it seems that the Euro Index is on a verge of breaking below a combination of strong support lines (having invalidated the breakout above the very long-term resistance line earlier this year). Such a breakdown – if it materializes - will like be followed by a substantial move lower. Secondly, the previous big downswings in the Euro Index were seen along with big declines in gold, silver and mining stocks. Naturally, the combination of the above points is bearish for the precious metals sector.

Summing up, we had expected to see a pause within the decline and we did. The move higher was higher than expected, because of the unforeseen crash of a civilian airplane, allegedly shot down near the border between Ukraine and Russia. The move – even though it was greater than it had been likely to be – hasn’t changed the overall trend, and it seems that the precious metals market will soon move in tune with its medium-term trend – which at this time is still down. Our best bet is that we will see a major bottom in the precious metals sector later this year –we don’t think we have reached this point yet. The short position that we mentioned on July 14 (we wrote about it more or less before half of the daily decline) still seems to be justified from the risk/reward perspective.

To summarize:

Trading capital (our opinion): Short (full) position in gold, silver and mining stocks with the following stop-loss levels:

-          Gold: $1,353

-          Silver: $21.73

-          GDX ETF: $28.30

Long-term capital (our opinion): No positions

Insurance capital (our opinion): Full position

You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

As always, we'll keep our subscribers updated should our views on the market change. We will continue to send them our Gold & Silver Trading Alerts on each trading day and we will send additional ones whenever appropriate. If you'd like to receive them, please subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com

Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

As we commented in our last blog update, the stage was set for a short term rise in gold after finding support at the 50% retracement of the June rally at 1292.

Gold powered higher yesterday, hitting a high of 1325, right at the 61.8% retracment of the decline, before retracing back to currently trade around 1310.  The rally does not make up for the fact that gold is sharply down for the week and is in serious danger of another failure to break the 65 week MA, a very bearish long term signal.

The bulls must push the price back above last week's high at 1345 to avoid a potentially catastrophic failed breakout and a virtual guarantee of a return to 1180 - the signs do not look good for the bulls at this juncture.

Equities remain strong and near to all time highs, the dollar is trading back above 80.50 and oil has tumbled back to $100 a barrel.  All of these factors are negative for gold and add to the bearish picture.

Support can be found at 1310, 1299-1301, 1292, 1285, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - a failure to break the 65 week MA would make this much more likely.

Resistance can be found at 1318-1322, 1325-1326, 1333-1335, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We appear to be wtinessing a second failure to break through the key 65 week MA - this would suggest that the intermediate down trend is intact and a retest of 1240 and possibly 1180 is likely.

Today's video for subscribers looks at the recent trading in more detail and our strategy for our next trade.

Gold fell sharply again yesterday, crashing through 1300 before making a low at 1292, being the 50% retracement of the June rally and also the level of the 50 DMA.  This morning, gold is attempting a rally off this support zone, climibing as high as 1299 so far.

It is not surprising that the market has found support here and a clear 5 wave count can be formed on the 4 hour chart, so a corrective move higher is likely over the next day or two.

Equities remain the favoured asset class, with the S&P and Dow at all time highs.  The dollar has rallied impressively after briefly dropping below 80 on 1 July, with the dollar now trading above 80.50.

Oil has tumbled below $100 a barrel again, though formed a "hammer" candlestick on the daily chart yesterday after a sustained decline, suggesting a low may be in.

Support can be found at 1292, 1285, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - however the break below 1250 seems to have been invalidated, indicating that a return to 1180 is now less likely.

Resistance can be found at 1299-1301, 1310, 1314, 1318-1322, 1325-1326, 1333-1335, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We appear to be wtinessing a second failure to break through the key 65 week MA - this would suggest that the intermediate down trend is intact and a retest of 1240 and possibly 1180 is likely.

Today's video for subscribers looks at the recent trading in more detail and our strategy for our next trade.

Gold has reversed sharply after breaking through resistance at 1333 last week, suggesting that the breakout was a fake move and significantly increasing the likelihood of another failure to break the 65 week MA.

This would be a very bearish development, just as a successful break above the 65 week MA would be viewed as extremely bullish.  If the bulls cannot make a stand here and recapture 1333 very shortly, the bearish scenario becomes our favoured outcome.

Equities are up mildly and the dollar is flat, as is oil - we can therefore conclude that the sell off in gold is not being driven by outside markets.

Support can be found at 1300-1301, 1289, 1285, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - however the break below 1250 seems to have been invalidated, indicating that a return to 1180 is now less likely.

Resistance can be found at 1310, 1318-1322, 1325-1326, 1333-1335, 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We are now attempting to break through the key 65 week MA - if the breakout is successful, this would suggest that the intermediate down trend is at an end and higher prices are ahead, though a failure would be very bearish.

Today's video for subscribers looks at the recent trading in more detail and our strategy for our next trade.

Gold powered through resistance at 1333 yesterday morning, surging as high as 1345 as fear of a Portuguese banking crisis swept through the markets, sending equities tumbling sharply lower.

Gold retraced back to 1335 later in the session but closed above 1333 and is set to close the week above both the 65 week MA and the long term down trend channel in a potentially significant move.

Strong follow through buying next week and a break of 1350 would confirm that the intermediate term down trend is over and the bulls are back in charge of gold, however a sharp reversal here would be very bearish as it would potentially signify another failed attempt to break the 65 week MA.

If the bullish scenario is playing out, we would expect a sharp correction in equities and continued dollar weakness as well - things could get interesting for the rest of the year if this is what is happening!

Support can be found at 1333-1335, 1325-1326, 1318-1322, 1310, 1306, 1300, 1289, 1285, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - however the break below 1250 seems to have been invalidated, indicating that a return to 1180 is now much less likely.

Resistance can be found at 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We are now attempting to break through the key 65 week MA - if the breakout is successful, this would suggest that the intermediate down trend is at an end and higher prices are ahead.

Today's video looks at the breakout in more detail and our strategy for our next trade.

After a tepid, though mildly bullish, response to the FOMC meeting minutes released last night, gold has risen this morning and is in the process of breaking through resistance at 1333 and more importantly confirming the break of the 65 week MA and the long term down trend line.

This is a potentially very bullish development and would strongly suggest that the intermediate term bear market correction in gold is over.  However, we need to see further confirmation before we can definitely say that the correction is over.

This development also suggests that we can expect to see further dollar weakness and equities may be approaching a top as well.  This morning, the dollar is clinging to support at 80 and equity futures are down sharply and in danger of breaching the 20 DMA - a potentially significant development.

Support can be found at 1333, 1325-1326, 1318-1322, 1310, 1306, 1300, 1289, 1285, 1263, 1257-1260, 1250-1252, 1237-1240, 1220-1225, 1210, 1200 and 1180.  A break of 1180 would have serious bearish implications for gold and suggest a decline to 1000-1050 in the short term - however the break below 1250 seems to have been invalidated, indicating that a return to 1180 is now much less likely.

Resistance can be found at 1340-1342, 1352-1354, 1392-1395, 1400, 1420 and 1435.  We are now breaking through the key 65 week MA - this would suggest that the intermediate down trend is at an end and higher prices are ahead.

Today's video for subscribers looks at the recent trading in more detail and our strategy for our next trade.