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$1920 gold - The first real test for bulls?

Jonathan Da Silva

Kitco Commentaries | Opinions, Ideas and Markets Talk

Featuring views and opinions written by market professionals, not staff journalists.

Commentaries & Views

Last week, I suggested a run to $1920 was likely from Thursday's low of $1875. Spot gold has since hit $1925 before turning back down. The question for traders now is whether the meat of the dip occurred last night, with spot prices briefly breaking below $1900 just before midnight EST. If so, it was quick and shallow, with a run to $1950 still likely to follow. For now, a close above $1920 for the week signals that this run still has short-term legs before a deeper pullback occurs. Although gold likely has higher to go before the spring – this current short-term run seems stretched, in my opinion. If $1920 holds up for the bears this week – a move to the $1865-80 level would not surprise me.

If this seems like I'm suggesting it's a craps shoot on which way it goes over the next week or two (1865 or 1950), it's because I think it is. However, both traders and long-term physical holders would do well to recall that "the trend is your friend," at least until evidence mounts that trend change is imminent.

Below is a 4-hour silver chart showing resistance at $24.50. Note that the upward-sloping trend line going back to November is broken. Bulls should be on the lookout for the $23.80 level to hold – below that, a move to the January 5 low is in sight, with consideration for a deeper pullback in play.

As early as mid-October, I suggested that should the top downsloping trendline of the S&P 500 be broken to the upside, consideration for a renewed bull market is merited. The below weekly chart shows the price consolidating above that trendline but below the 50-week MA. Bulls want stochastic RSI to stick into the overbought position while the price closes above 4100 on a weekly basis.

I'm not suggesting that a rip-roaring move is about to occur in stocks, but; I am asking if you're contrarian enough to consider the possibility that stocks (specifically the S&P) are building fuel for an imminent move back to new all-time highs.

Thanks and good luck!

By Jonathan Da Silva

Contributing to kitco.com

Contact jdasilva@kitco.com
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.