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Time to fold gold and silver? S&P ready to resume the run up?

Kitco Commentaries | Opinions, Ideas and Markets Talk

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

Commentaries & Views

It’s hard to take a week off in the gold market.

On the last Friday of September, I wrote that I was still willing to give the long side trade the benefit of the doubt even though sellers were able to prevent a breakout at $1950 on the FOMC. On Tuesday of last week, sellers broke $1900 to the downside, continuing the pattern of lower highs and lower lows. On Wednesday the August $1885 low was breached and a cascade of selling quickly ensued. In short – there were lots of signs of danger, even though hindsight is always 20/20.

Respect for stops is paramount.

What next? Gold weekly shows that the bleeding has a chance of slowing here as price gets into the long-dated support/resistance level demarcated in yellow.

Metals have been in the throes of a frustrating sideways correction dating back to this spring, the type of action that does a real number on bullish sentiment. Of course, the more bearish sentiment becomes, the more excited contrarians should become. Is the bottom in? Again, the best we can do without a crystal ball is pick a spot to enter and manage risk accordingly. My feeling is that we are nearing the end of this selloff, at least for now. Traders could try a long side trade with stops at low of day (in my opinion) with a target of $1850 to start.

Friday’s reversal candle in the gold/silver ratio is massive. Although it’s back at top of range I’ve been showing (which is one of the reasons for why I think a short-term long play in gold is viable here), daily momentum on the ratio is turning up, and a breakout is a real possibility. That would drive metals lower, likely annihilating any bullish sentiment that still lingers.

An update on the S&P futures chart I’ve been showing for months: Finally, the gap I have been pointing to (black arrow) has closed, and daily momentum looks to have bottomed as well. Traders may consider a long position with a stop at last week’s low.

Thanks and have a great week,

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.