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Long-Term Chart Outlook

Monday December 31, 2012 11:53

With the fiscal cliff and the debt ceiling looming overhead and the very low volume this past week we saw some violent moves in stocks and markets, the kind I’d rather avoid.

I didn’t take a single trade all week with many better things to do than stress about the markets and the very fast moves that took place.

With only one trading day left in 2012 I am going to do our normal look at daily charts but I’m also going to give us a look at the long-term outlook on the precious metals today.

While Monday, the last trading day of 2012, could be wild with the fiscal cliff supposedly coming to a head Sunday night, hopefully the charts won’t change that much as a result.

Let’s get into the charts now.

Metals review

Gold was flat for the week rising only 0.06% and unfortunately building a bear flag pattern here which should push it lower.

Last week I talked about gold hitting support and that the low looked to be in but now after a week of trading, the chart is setting up for lower prices again.  I’d expect a move to just under the $1,600 area very soon.

This is just short-term actions so let’s look at gold’s monthly chart now and see the big trend. 

I base my physical gold holdings on the long-term chart and trade the GLD or other ETF’s the odd time off the daily chart.

Gold really needed a base since nearly hitting $2,000 in 2011.  The year long consolidation is not over yet but using history as a guide we should see a breakout above the crucial $1,800 level in about 4 months and it should lead to a move to the $3,240 area.

I won’t bore you with the intricate details of how I came up with that number but looking at base 1, base 2 and now base 3 I’m just looking at the exponential increases in the base formation and gains afterwards to look for the next possible area of resistance  for gold.

Long story short, gold looks fantastic.

You can clearly see in the first two bases how the consolidation led to a large build up of power and strength which in turn led to huge moves.

This is how stocks and markets work.  They need time to digest gains and shed as many traders from their positions as possible before embarking on the next move.

$1,800 is the next breakout level that will see a hefty rise in gold so don’t sweat the small stuff.  Accumulating gold on weakness has worked for a decade and will for a couple more years at least.

Silver rose a paltry 0.43% this past week and is setting up a bear flag also which has the $28 area squarely in its sights.

Silver is all but guaranteed to hit the $28 area in the very near future and that is all there is to it.

That’s what the chart tells me and I don’t really care too much about the reasons why.  Simply put, buyers and sellers are saying silver is heading lower.  Who those buyers and sellers are is a different story but one I can’t control so I just read their moves and try and take advantage of them.

Let’s take a look at what really matter, the long-term monthly chart.

Silver looks nice here and it’s also building a great base that could eventually form a type of cup and handle pattern which is very powerful and that is marked in red on my chart.

You can clearly see the trend is higher on this long-term chart and we’re just in a base/power building phase at the moment.

The next move could take silver to the $120 area.

As the great Kenny Rogers said; “You’ve got to know when to hold ‘em, know when to fold ‘em”

Now is the time to “hold em”!

Platinum fell 1.15% this past week as it exited it’s bear flag pattern.  This is the type of move we can expect from gold and silver very soon.

I’m first looking to $1,500 as support and if that area fails to hold then we could see a much larger move to the $1,435 level.

While this may sound extreme, the longer-term chart paints a very different picture with the chart still being bullish and intact even if we see a move to $1,382.  Let’s take a look at platinum's monthly chart and see what I’m talking about.

Platinum is setting up a great and very large triangle here which should see higher prices coming up pretty soon.  The $1,670 area is the breakout point and this next move should see platinum move well beyond its high of $2,200.

We could see support near $1,382 tested and that would be fine but I’d not like to see a move much lower than that.

Palladium rose a solid 2.92% this past week and broke out of it’s cup and handle pattern that I’ve been talking about for a couple weeks here.
The proper buy point has come and gone but the next buy point is a break into new recent highs above $710 over the next few trading sessions.

While the daily chart looks by far the best of any precious metal and much better than most stocks and any indexes, the long-term chart is a bit of a mess.

Let’s take a gander at the monthly chart now.

While palladium has certainly had its moments, the long-term chart is nothing special at all.

There is no real trend higher here, rather, a lot of chop and trend changes.  A move above $736 should see the $800 area tested before we can look to the highs above the $1,000 level.

I am very excited for 2013 to begin and get back to my normal work schedule but first we have to ring in the New Year with a bang!          

Happy New Year!

Warren Bevan

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 precious metal products, 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.

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