by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Gold pulling back from last weeks rally to 1220

30 Mar 2015 12:25 PM | Bill Downey (Administrator)
In the wake of the Fed announcement at the last FOMC meeting that interest rate increases in the United States will come later rather than sooner, gold and silver prices moved higher. Gold moved from lows of $1142.40 on the now active month June COMEX futures contract to close on Friday, March 27 at $1198.60 per ounce -- an increase of just under 5%. The move in silver was even more dramatic, with silver appreciating from lows of $15.26 on March 11 to close on Friday at $16.97 on the active month May futures contract -- an increase of 11.2%.

While gold and silver recovered as the U.S. dollar moved lower, the situation in Yemen is a watershed event that the metals paid little attention to, so far. When the Saudis and coalition forces announced airstrikes that will precede a ground invasion of 150,000 troops, the metals rallied for a full 20 minutes from 1205 to 1220 and it has been downhill ever since that price peak last Thursday.

The Saudi action is a clear signal that the war between the Sunni and Shiite Muslim world has reached a new boiling point. The action in Yemen goes far beyond reinstating a deposed Yemeni leader. This new war is an escalation of a proxy war between the Saudis and Iran. Gold and silver are both ignoring the situation (so far).

Silver rallied more than gold after the Fed statement, however, that rally appears to be suspect as well. Lower open interest during the recent rally leads me to believe that the buying was nothing more than short covering. As with gold, momentum indicators could be turning negative here and relative strength is in overbought territory.

The Fed statement, which will keep interest rates low, and the incendiary situation in the Middle East, only caused a tepid response in both the gold and silver markets.

Concerning the action in gold and silver is that open interest has decreased with the recent moves higher. This is a red flag for prices. Volume has also been interesting. Gold had a big volume day on Thursday, March 26 -- over 372,000 contracts traded, which is the most active day in a very long time. However, the price of gold traded up to just over $1220 and failed, closing $15 lower on the session. Meanwhile silver volume has been unexciting -- on March 20 when the silver price vaulted higher by 77 cents and closed on the highs of the session, only 65,364 futures contracts traded.

Meanwhile, it is clear that the gold and silver markets are not reacting to the situation in the Middle East, rather only to the gyrations in the dollar. If that is the case, these metals are likely to head lower once the US dollar correction from the 100 area is complete.

It seems clear that the Federal Reserve put off raising short-term interest rates because of the trajectory of the U.S. dollar. It is in the best interest of the U.S. central bank to smooth volatility in currency markets. The Fed is well aware that keeping their promise and even a symbolic rate increase would add fuel to the dollar move. Instead, a prudent approach of kicking the can down the road in terms of higher rates will take some steam out of the dollar's ascent.

However, so long as gold and silver remain below the first key areas of resistance -- $1225 in gold and $18.535 in silver – the medium term downtrend remains in play. So while the short term moves up and down, we need to see gold above 1225 in order to favor Higher prices in April and into mid May.


When Will China Disclose Its True Official Gold Reserves And How Much Is It?

Submitted by Tyler Durden on 03/29/2015

"If the RMB wants to achieve international status, it must have popular acceptance and a stable value. To this end, other than having assurance from the issuing nation, it is very important to have enough gold as the foundation, raising the ‘gold content’ of the RMB. Therefore, to China, the meaning and mission of gold is to support the RMB to become an internationally accepted currency and make China an economic powerhouse. That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US."

- Song Xin, Party Secretary and President of the China Gold Association


Gold Chart

GoldTrends subscribers were long in gold on a short term trade from the FOMC meeting at 1159 and sold positions on Thursday at 1204. The pullback began an hour later as we have reached 1183 here on Monday morning. Support on Monday is 1178-1182 and then 1166-1172. Resistance is 1194-1197 and then 1201-1205. A close below 1178 will favor a test of 1166-1172 next and would put the short term from bullish trend to neutral.  

Gold hourly price chart with suppport and resistance lines

Cycles
The next cycle turn is due April 4th (plus or minus 72 hours). That means the window opens on Wednesday of this week. We have been expecting a high at 1205-1211 or 1222-1228 to develop during this cycle and its very possible that we saw the high at 1220.40 on Thursday. While this would be very early, we do have a 2nd cycle we follow (and rarely mention) but it was due last Thursday.

It is always possible for gold to pullback back into a low on April 4th even though that is not the odds favored outcome. Remember odds don’t always play out as anyone who has been to the racetrack knows. A low on April 4th would actually be more bullish as blue cycle lows most often favor rallies in gold where red cycle lows are usually just a bounce in a downtrend. The other side of the coin is the pullback in gold here to say 1172-1182 could form a low early this week and then have gold re-attempt to challenge 1205-1220 near the end of this week. It’s a difficult call because resistance has been met but before the cycle window opened. Lets see how the rest of today plays out and early Tuesday.

Gold cycles


Silver
Subscribers were long silver on a short term trade from 1579 and sold out last Thursday at 1724 for a nice gain.

First support at 1664 was reached on Monday and additional support is the 1615-1640 area. Resistance is the 1692-1704 area and then 1712-1722. A close below 1660 puts the short term from bullish to neutral.

Silver hourly price chart with support and resistance lines



Technical Analysis :: Gold & Silver

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