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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A technical look at gold and other markets

18 May 2015 11:17 AM | Bill Downey (Administrator)


Trend

Long Term ~ Bearish– Need a monthly close above 1389-1468 for neutral trend without bearish potential. The key resistance area’s to regain new bull market leg are 1792 and 1804-1830

Medium Term ~ bearish– We need a monthly close above 1255 to neutralize the downtrend.

Intermediate Term ~ Neutral– Resistance 119-122 in gold ETF GLD.

Resistance for this week 1234-1244 and 2nd tier 1256-1264

Support for this week 1209-1216 2nd tier 1192-1202

Resistance listed for last week was 1198-1208 and 2nd tier 1222-1225 and the high was 1227. Support was listed at 1168-1172 and the low was 1178.

Events~

The FOMC minutes will be released Wednesday Afternoon.

 Economic Calendar (Bloomberg) for week of May 18th 2015


For some time, we have been saying that the ultimate goal of those in charge at the moment is going to be the elimination of CASH as all of us eventually are put on PLASTIC.

Europe has begun to move in this direction. In order to keep the Euro afloat, they must keep the banks solvent. But the bank reserves are debts of all the Euro nations. As government becomes insolvent as in Greece, the banking system debt turns worthless. The only way to prevent the banking collapse is to prevent people from withdrawing cash. As you will see below, the mainstream press is getting the people ready for what is coming - the elimination of cash. 

Here is the article below and this is our future.

How to end boom and bust: make cash illegal

Comment: Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms.

By Jim Leaviss

This story is part of our "Money Lab" series, in which respected figures from the world of finance put forward controversial ideas for improving our personal finances or the economy. We will publish this story in print in "Your Money" this weekend along with the best comments from readers, so have your say below

A proposed new law in Denmark could be the first step towards an economic revolution that sees physical currencies and normal bank account abolished and gives government futuristic new tools to fight the cycle of “boom and bust”.

The Danish proposal sounds innocuous enough on the surface – it would simply allow shops to refuse payments in cash and insist that customers use contactless debit cards or some other means of electronic payment.

Officially, the aim is to ease “administrative and financial burdens”, such as the cost of hiring a security service to send cash to the bank, and is part of a programme of reforms aimed at boosting growth – there is evidence that high cash usage in an economy acts as a drag.

But the move could be a key moment in the advent of “cashless societies”. And once all money exists only in bank accounts – monitored, or even directly controlled by the government – the authorities will be able to encourage us to spend more when the economy slows, or spend less when it is overheating.

This may all sound far-fetched, but the idea has been developed in some detail by a Norwegian academic, Trond Andresen*.

In this futuristic world, all payments are made by contactless card, mobile phone apps or other electronic means, while notes and coins are abolished. Your current account will no longer be held with a bank, but with the government or the central bank. Banks still exist, and still lend money, but they get their funds from the central bank, not from depositors.

Having everyone’s account at a single, central institution allows the authorities to either encourage or discourage people to spend. To boost spending, the bank imposes a negative interest rate on the money in everyone’s account – in effect, a tax on saving.

Faced with seeing their money slowly confiscated, people are more likely to spend it on goods and services. When this change in behaviour takes place across the country, the economy gets a significant fillip.

The recipient of cash responds in the same way, and also spends. Money circulates more quickly – or, as economists say, the “velocity of money” increases.

What about the opposite situation – when the economy is overheating? The central bank or government will certainly drop any negative interest on credit balances, but it could go further and impose a tax on transactions.

So whenever you use the money in your account to buy something, you pay a small penalty. That makes people less inclined to spend and more inclined to save, so reducing economic activity.

Such an approach would be a far more effective way to damp an overheated economy than today’s blunt tool of a rise in the central bank’s official interest rate.

If this sounds rather fanciful, negative interest rates already exist in Denmark, where the central bank charges depositors 0.75pc a year, and in Switzerland.

At the moment it’s easy for individuals to avoid seeing their money eroded this way – they can simply hold banknotes, stored either in a safe or under the proverbial mattress.

But if notes and coins were abolished and the only way to hold money was through a government-controlled bank, there would be no escape.

Apart from the control over the economy, there would be many other advantages of a cashless society. Such a system is much cheaper to run than one based on banknotes and coins. Forgery is impossible, as are robberies.

Electronic money is an inclusive and convenient system, giving poor and rural sectors of an economy – where cash machines and bank branches may be few and far between and not all people have accounts – a tool for easy participation in the economy.

Finally, the “black economy” will be hugely diminished, and tax evasion made all but impossible.

(End of Article)

Gold what is happening?

With the myriad of stories and events that are culminating worldwide its probably no coincidence that gold is trading at the one area we have been saying is its most important trend line at the moment and that is the 2005 uptrend line.

What is important to understand is this line is the decision point where gold either begins a 5th and final wave down which leads to and towards 850-1050 or whether it makes an attempt to bottom here in a truncated fashion and reverse gold higher in an attempt to end the bear market that began in Aug/Sept of 2011.

Gold Long term uptrend line price chart

Gold Long Term price point

As you can see by the long term chart above, there is a 10 year trend line that needs be watched carefully.  Should this trend line give way, then prices would favor a move toward 1000 as support number two.  This trend line was drawn off the 2005 lows and is an ALTERNATE LINE I’ve been watching.  I’ve a different angle on the medium term black chart you usually see on this report that crosses around the 1100 area.  Because price has bounced off this line for six months, it has become relevant in this current price watch.

Gold is on the verge of potentially reversing the bearish medium term trend to NEUTRAL.  That is the first step in turning the trend up.  It has to move to NEUTRAL and then if the TREND SUSTAINS it will move to bullish.  

What must gold first do to display a medium term trend change? 

It must produce 2 consecutive weekly closes and a monthly close above the moving averages. 

The moving averages are now at 1206 and 1220. 

Gold has closed above the averages for the first week now and we must close again above this number in the coming week.  It must then close above 1220 at the end of May.

In addition to moving averages, gold must close above 1255-1277 on a weekly/monthly level to add some Fibonacci confirmations that gold is turning up on a medium term level.

In addition, perhaps the most important medium term number to watch is the 1297-1322 area.  Weekly and monthly closes above that level would be suggestive of a move towards 1480-1520 for gold on a medium term level.

But let’s take it one step at a time.  

Gold on the short term

The one other sign that gold might be turning up is that an uptrend channel has formed at the last medium term cycle date (Week of March 23rd).   Price is about ½ way up the channel and is at is most important resistance in this price zone.  Note how price has been held in check here since the middle of February at this Fibonacci resistance and weekly price reversal point.   The key is there are five tests.  It is rare (but not out of the question in this market) that a market can hold a 6th test of resistance. 

 Therefore a break above 1228 favors a move to 1236-1244 or 1255-1264 THIS WEEK.  Those numbers are different than what we have on the chart only because the chart is WEEKLY CLOSING NUMBERS.

Gold short term price chart since March 2015 low

Last week’s 1223 close was right in between 1222-1225. Is that enough?  What it tells us is that gold remains uncertain and that we should see a test of 1236-1244 this week and then we will see if gold wants to rally further.  

Keep in mind that gold’s seasonal trend usually peaks near mid May and moves lower into June/July.  Those are the odds.  Odds are not absolutes, and we should remain cautious just the same.  With short term cycles due to peak this week,  it would not be out of the question then to see gold peak between Monday and Thursday of this week and then turn back down into early June.  Remember, odds are odds, not absolutes.  There are no absolutes in markets.  Look for a probe of 1236-1244 this week and then we’ll see if gold turns down from there or holds another weekly close above 1222-1225.

Gold on the intermediate term level

For this chart the view still shows that overall gold is in a downtrend from 2014.  The next target of interest is the December 2014 high at 1239.  Note how it coincides with the Fibonacci retracement and our weekly range mentioned earlier of 1236-1244 for the coming week. 

The real short term question is this.

The weekly reversal point is 1220-1225 and with a Friday close in between both numbers at 1223, gold leaves its OPTION OPEN to go test 1236-1244 this week and still close below 1225 by week’s end.   We’ll have to see whether gold just going to clear the stops above 1225 or if its seriously going to begin a medium term rally. If it does, it will be the exact opposite of what usually happens.   

Gold intermediate term price chart 

Commodities

Medium Term trend – Bearish

Moving averages – 240 – 253

We have been favoring a seasonal bounce in commodities in the April/May timeframe and price has moved as high as 236 and getting within 4 points of the first moving average.  On the daily chart below the short term moving averages have turned up.   Support comes in at 216-226.   Resistance is at the 240-253 area.   

On the medium term, two weekly closes and a monthly close above 240-253 would neutralize the commodity downtrend.  

The trend is up but it’s not a strong trend.  The current target remains 240-260 and then we’ll see.

 In summary, while it may not happen this coming week, odds are that the commodity bounce is not yet complete and that price should move to the moving averages and or the white channel line near 260.

Commodities weekly price chart

CYCLES

The next short term cycle is due May 18th (plus or minus 72 hours). That means we favor a high this week and a pullback to begin that will last until the 1st week in June.  Odds are 75% that the red cycle will take effect.   That means that odds are high gold peaks between May 18th – 21st of this week and a pullback will take us into the 1st week of June. The 1236-1244 area or the 1255-1264 area is the odds favored price peak this week.

 Gold Cycles

Gold Medium Term

Long Term Trend ~ Bearish since Oct 2013 @ 1361

Long term Moving averages 1365 – 1443

Medium Term Trend ~bearish – Moving Averages 1206 – 1220

On the Upside:

Look just above at the medium term moving averages as they are down to 1206-1220. Two weekly and a monthly close above this area is needed for gold to move to NEUTRAL on the medium term.  Last week completed the 1st week.

On the downside:

This is what we have been listing every week:

If there is one PLACE to look for the BULL/BEAR line it’s this 1172-1192 area.

Last week’s low was 1178, so gold continues to HOLD THE KEY AREA NEEDED.  As long as it does that, then an upside move can still take place.  

We stated during the rally from November to January that the bull market in gold can ONLY resume if we take out the dual triple green channel lines and make it support. Price reached the middle line at the triple green trend line and then turned back down and has not looked back since. And that’s really the bottom line. In order for the gold market to resume its bullish form gold absolutely must make the triple green channel line a price support point and not resistance.  

In Addition the blue moving average has to cross above the red in order to confirm the trend change. Until that time, the downtrend remains intact on the medium term.  

One final note, the 2014 closing price of 1182 makes 1172-1192 the YEARLY PIVOT. Under 1172 leaves the odds on the downside and above 1192 the upside. If there is one PLACE to look for the BULL/BEAR line it’s this 1172-1192 area.

The bottom line is gold has to make the triple green trend line support and not resistance. When it does, the medium term trend moves to an upside bias. Until then, be careful, especially when we are below last year’s closing price (1182).  Odds favor that the lower resistance lines will be tested before the bear market ends.

Gold Weekly Price Chart

Silver Medium Term Weekly Price Chart

Long Term Trend ~ bearish 22.69 – 25.34 - it takes a monthly close above 27.00 to neutralize the long term downtrend.

Medium Term Trend ~ Bearish 16.67 – 17.32

We’ve highlighted the long term trend line that silver is holding by making it a double green line.  As long as we hold that line, silver has the potential to have formed a long term bottom. 

The 1850-1900 and the 2133-2200 area is where the greatest concentration of resistance currently resides. On the long term, it will take a monthly close above 2133, before the downtrend is neutralized. Any weekly/Monthly close below 14.75 will favor a resumption of the downtrend.

As long as we hold support at the 1475-1525 area, the potential for silver to move higher on the medium term still has some merit. The bottom line for medium term silver is that price needs to make the moving averages (16.67-17.32) support, and not resistance for the trend to turn up on a medium term basis.

On the monthly chart below the other thing we have been saying is to look for silver to take out that DOWNTRENDING GREEN CHANNEL LINE. We said if it did that odds favored a move in silver to either 1850 or most likely to the other channel green channel line on the chart below at the 21.33 area.   It looks like last week has taken out the green line and thus a move to the 1850 (plus or minus 25 cents) looks likely to develop this week and then we will see.

The higher green parallel line on the chart represents the 2008 price high before the crash. It is this line and price area that Silver MUST re-conquer and make SUPPORT again on a monthly basis in order to turn things around in silver.

In summary, silver has exceeded the down trending Green channel line and the moving averages.  That favors a move towards 1850 and then we’ll see.  The medium term moving average trend will come out of bearish mode and move to neutral if silver closes the month above 1732.


Gold weekly price Chart


Bond Chart Update

Medium Term – Bullish for lower rates (but getting near Neutral).

Moving Averages – 21.13 – 21.92

10 Year T-Notes

Prices have reached the medium term moving averages as bonds are becoming less and less desirable at these interest rate levels.

The key line is that green down trend line. As long as we are below that line, the long term interest rate picture is still in a downtrend. In 2015, it will be the 34th year since the downtrend began. Odds favor lower rates are in their final throws lower and a new bear market in bonds is coming. This is the real “bubble” that will bring down the global debt crisis once the bubble bursts and once interest rates turn up, odds favor the bear market in gold will be complete.

On the shorter term timeframes the current uptrend line where price resides is the last meaningful support until the 2012 and 2013 lows. With negative rates now appearing in a few countries on the 10 year, it is not out of the question for rates to move lower for a bit longer.  The Fed is so trapped in that it wants to raise rates, but they are afraid what it will do to the US dollar and send it higher.  On the other hand, if they don’t raise rates before the next recession, (which looks like is about to develop) the Fed will be without its main ammunition (lowering rates) in order to spur growth.  

The bottom line is that if the Feds raise rates, a higher dollar ensues and if they don’t, they will be powerless to do anything about the upcoming recession.  And odds favor, the bottom ls going to implode at some point-----probably during the 2nd half of this year.

10 Year T-Note weekly long term price chart

US Dollar

Long Term Trend ~ Bullish 83.56 – 81.50

Medium Term Trend ~ Bullish 92.00 – 89.42

The seasonal upside we favored in commodities for April/May is opposite for the US dollar as the correction that began on March 13th is still playing out.   

Support is 91.50-92.00 at the blue moving average and at the white channel line at 93.00.    That area is also the first target for support for this correction.   The 2nd target area is the red moving average near 89 and the 2nd lower white channel line right around 90.  Thus we have 91.50-93.00 (1st target) and 89-90 as the 2nd target.  As you can see we have reached the USD 1st support area and thus it will be important to watch this weeks activity in USD.  In summary, the correction in the USD is still in play but we suspect that we may see some support forming here or near this price area (91.50-93.00) with a rebound attempt coming.

 US dollar weekly price chart

Euro

Medium Term Trend ~ Bearish 115.23 – 119.03

After being bearish the EURO from the 136 area, we changed our stance the week after price reached the lower long term trend line (March 13th) and since then we have been looking for a bounce back rally to the 116-117 and potentially the 123 level in the Euro.

So far that is exactly what is playing out.

Resistance is now 115-117 and 123. We continue to feel a Euro bounce is underway from the par level. We have felt an important low may be in place for the 1st half of this year since late March and a bounce into May/July should take place.  But we are well aware that all is not well in Europe and that this forecast is merely for a bounce in the longer term picture.

The Euro just about reached par and on a longer term perspective, if the Euro loses that trend line on the chart, it could very well be heading towards the 80 level. So while the long term is still down, it would take a monthly close below 98 to signal the next big move towards 80 is underway. With that said, Europe has a number of significant dangerous situations going on. In summary, we favor the Euro will stabilize for the moment. While we favor it, we are aware it could change quickly with a situation like Greece unfolding.  The longer term trends remain bearish but a bounce to that white line and the moving averages we have been favoring should take place.

Odds favor we are heading for the next trend line resistance (and the blue moving average).  

Euro weekly price chart 

HUI GOLD STOCKS INDEX

Long Term Trend ~ Bearish - Moving Average Trend – 266.41– 317.27

Medium Term Trend ~ Bearish - Moving Average Trend – 178.49 – 199.68

Intermediate Term Trend ~ Bullish – Moving Average Trend – 177.84– 177.23

There is no confirmation that the low is in place at this time and the HUI gold stocks are still in downtrends overall. Certainly price is at the 2008 crash lows and that does allow for a major long term bottom to form. But we need to see this market return to a position of strength and the bottom line is that there has yet to be a HIGHER HIGH registered on this chart since the top. Until the HUI gets above the Gold colored dual downtrend line and the dual green uptrend line, the overall bear market downtrend is still in play.

However, on an intermediate term basis, we have stated that gold stocks usually get a SPRING RALLY in April/May and that time frame has been holding up the gold stocks.  Indeed, stocks have held their ground while gold is struggling to not break to new lows.  A weekly close above 186 would favor a test of 195-210.

 HUI gold stock index weekly price chart

STOCKS –USA

Long Term Trend ~ Bullish since 8/31/2011 @ 122 ~ Moving Averages 178.34 -165.69

The long term trend remain bullish. The long term trend since 8/31/2011 at 122.

Medium Term Trend ~ Bullish – Moving Averages 205.00 – 202.90

Basically unchanged since last week.

We have discussed in the past that December 2014 was 40 years from the 1974 stock market low and the potential for a major high could develop. The spike high in Futures and SPY at the last resistance line occurred then.  

Odds favor that we have seen an important high in the stock market but we need to at least trade below the moving averages to get more confirmation (199-201). It’s certainly an important long term resistance line that is just above price, but if we close above that line it is possible that the stock market could go much higher. As impossible as it seems, if we lose the last resistance line, a MELTUP equivalent to 5000 Dow points could occur. There just isn’t any long term resistance lines above the current one where the arrow is drawn. Until we make a new high above that spike on the chart that reached “last resistance” the odds for a pullback in stocks remain in play.   On the downside, we need to take out the moving averages and close below them for two consecutive weeks.

 S&P 500 ETF SPY weekly price chart

What Next

Gold is making its attempt to move out of the trading range of 1175-1225 that has ruled since February.  Its certainly picking an unusual time as gold prices often peak in mid May and pullback into the June/July area.

The key is going to be whether gold can conquer the next set of resistance which this week is the 1234-1244 area.

On the downside

What we have to be on guard for is that gold takes out 1225 during the week and the stops above it but then fails to take out 1234-1244 and then closes below 1222-1225 by Friday.  That would keep the medium term trend in a position to remain in a bear trend.

On the upside

A weekly close above 1244 will favor a move towards 1264-1272 and will set up the potential for gold to close the month of May above 1244. Then we’ll see.

 

Bottom Line

This is what we have been writing;

Two weekly closes above 1225 and a monthly close above there would neutralize the medium term downtrend.

Was the 1223 close last week close enough to 1225?  We’re not exactly sure yet but it does seem that gold is at least attempting to try a breakout.

Breakout of Fakeout?

It’s a good question because all we have seen in the past 4 years is a fake out.  The gold bear market is due to end this year.  But we are still not convinced that is should end now and at these price levels. 

First the short term

If we fail to close above 1236-1244 and close this week below 1222 then a fake out will be the preferred outcome and gold will pullback into the 1st week of June.

Short term gold cycles are due to peak between the 18th and 21st of the month.  Any NEW CLOSING HIGH IN GOLD AFTER THURSDAY of this week will favor HIGHER PRICES to the first week in June at the 1272-1297 area.

The DECEMBER HIGH IS 1239 in gold.  As long as we are below 1236-1244 then this can still be a setup for a weekly high this week and a pullback to June.

The medium term

We need another close above 1225 and a monthly close above that number to put the medium term trend from bearish to neutral.  That is the 1st step required for gold to begin to tell us its trend MAY be changing. 

Look at the weekly chart and note that the dual gold downtrend line is a resistance point and that the TRIPLE GREEN CHANNEL LINES need to be OVERCOME in order for gold to have potentially resumed its bull market uptrend.

The bottom line is that the overall gold trend remains down.  However, as long as gold remains above 1172-1182 on a weekly closing basis, the potential for gold to stage a rally can develop.   Since it has done that, and now is attempting to break above 1225, it seems a key week for gold.

Look for 1234-1244 or 1255-1264 as the two most likely high points for this week.  If we end the week below 1220, it will be a short tem bearish signal for gold that we should expect lower into the 1st week of June.

A close above 1236-1244 on Friday will favor higher into the 1st week of June.



Technical Analysis :: Gold & Silver

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