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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If gold is to continue rally, History Favors Silver to Follow

21 Mar 2016 12:09 PM | Bill Downey (Administrator)




If Gold is to Rally, History Favors Silver to Follow;

If gold is to rally, history favors that silver has to follow.   A look at the last 22 years shows this is where silver usually takes its cues and begins to appreciate more than gold.  Is there any fundamentals that suggest higher prices?



Investors seem to already be aware that silver prices are cheap relative to gold as you can see by this chart below by Smaugld.  A surge of buying in the last six months has come into play.

But there is one other thing worth noting about silver.



China's Silver Grab

By Sean Brodrick

Working very quietly, China is taking the reins of the global silver market, which is one more reason the price of silver is likely to move much higher.

Behind the Scenes

A major Chinese bank just became an official participant in the London Bullion Market silver price - the group of banks that matches buy and sell orders to set a daily price "fixing" for silver.

The bank is China Construction Bank. According to CME Group, this leading Chinese bank will officially join existing participants HSBC, JPMorgan Chase, The Bank of Nova Scotia, Toronto Dominion Bank and UBS as the entities that set the price of silver.

CME Group is involved because it provides the electronic auction platform on which the silver price is calculated or "fixed."

"China Construction Bank is delighted to be the first Chinese bank to become a participant in the Silver Price auction process in London," Mr. Gu Yu, general manager of the financial markets department at CCB, said in press reports. "This further builds on our combined efforts to boost renminbi liquidity and products in Europe."

At the same time, CCB says it will help develop a futures contract for physical delivery of silver in London. But this contract won't be denominated in British pound sterling, euros or even the U.S. dollar. Instead, it will be priced in renminbi, China's currency.

So, for those keeping score, that marks the first time that physical silver can be bought and sold in London (or in any global market) in China's currency.

Soaring Imports

Why is China doing this?

"China's silver imports recently hit their highest level in four years," Eric Fry writes. "Most likely, the Chinese are stepping up their silver purchases as a way to protect themselves from the risk that their currency, the renminbi, will continue to lose value against the U.S. dollar."

And sure enough, China's silver imports are soaring.


China's silver imports have grown for three years in a row. They're still not back to the levels China saw before its financial crisis. But China's investors are buying silver hand over fist as a way to beat that country's draconian capital controls. China's laws limit annual overseas transfers to $50,000 per person.

Fearing that their currency could be devalued further, Chinese investors and consumers are working around this rule every way possible. That includes buying silver to store wealth... or sometimes to easily transport wealth out of the country.

Sure, the IMF declared China's currency to be an official reserve currency last November. That puts the Remnimbi on a more even standing with global powerhouse currencies such as the dollar, the euro and the yen. But it is fundamentally overvalued, and many analysts fear a sudden devaluation of 10% to 15%.

More Bullish News

The Chinese aren't the only ones interested in silver. Holdings in the silver ETFs tracked by Bloomberg are expanding rapidly. Through Monday, inflows totaled 474 metric tons since the beginning of the year. That reverses almost all of last year's outflow of 524 metric tons.

And silver coins are flying off the shelves. From the start of the year through last week, 12 million U.S. Silver Eagles were sold. That's nearly 25% higher than during the same period a year earlier.

This level of silver demand is being called "unprecedented." February sales for U.S. Silver Eagles were the highest the mint has ever seen.

Meanwhile, on the supply side, a big squeeze is developing. Global silver mine production is expected to fall in 2016 by as much as 5% from 2015. This would be the first drop in mine production since 2002.

So, put it all together and things are looking bullish for silver prices.   (JUST KEEP IN MIND THAT GOLD MUST FOLLOW THRU HIGHER -  GOLDTRENDS)

Good investing,

Sean Brodrick

For The Non-Dollar Report

GoldTrends (Charts & Outlook)

Silver Short Term Outlook

Silver enters this week with 1st support near 1565-1575 and then 1520-1535.  Any move down to 15 or 14.50 should be considered a good buying opportunity.   IF silver moves above 16.40 resistance, then the 17-18 barrier would become the next target.  Remember, gold must keep its rally going if silver is to make waves higher.


Silver Long Term

On a long term basis we made our 1st silver buy Physical recommendation at 14.06-14.36.  Odds are highest that one of these two trend lines is where the low will happen.  We've already hit the Uptrend line and significantly, it was at the 200 Month Moving Average.  I personally have bought physical silver in December and March of this year.   We cannot remove the potential of silver reaching the down trend support line should the current recession turn into a full blown depression.   But if that were to happen, I would certainly add to physical holdings in the 12-10 & 8 area to complete my physical buys.  While there are no absolutes in markets, having some physical silver makes sense in the years to come.  

Gold Short Term Outlook

From a wave perspective, the best fit seems to be we have completed 5 waves.  Keep in mind the best fit is not the ONLY FIT.     As long as gold is above 1222-1232 the short and intermediate term trends are still up.   On the upside, as long as we remain below 1272-1287 then this wave count below will remain accurate and would allow a correction to deepen if we move below 1217-1222 on the short term.   The ideal place for a trade would be the 1172-1182 area in gold or near 1150.

Summary - marking choppy wave patterns is much tougher than clear impulse waves as in the 1st and 3rd wave on this chart.  Watch that 1217-1222 and up to 1233 area.  That's 1st level support and then the 1172-1200 area as a 2nd level area to watch.


Gold Cycles

Short term gold cycles favor a low March 23rd (plus or minus 72 hours) thus we are now in the window.   

The tricky part this time around is the Medium Term Cycle window is open (yellow).   We can argue a high has been made and a pullback towards support near 1200 or all the way down towards 1150 can still develop.  That would mean this coming blue cycle would produce a low, and a bounce but would be a weak one that would lead to a lower price at the next RED cycle (around April 21st) but keep in mind, this is speculation on our part.  

The other side of the coin is that gold will remain strong, and will bottom this week by holding 1217-1222 or even 1232 as support.  That's the strong scenario.  The normal scenario has gold reaching near 1200 and the weak scenario has gold moving back to 1150-1175.

For now watch either 1217-1233 or 1190-1200 area for two best places for a low this week.

What we don't want to SEE IS A HIGH FORMED IN GOLD THIS WEEK (Inversion).   That would put a lot more bearishness intermediate term on the cycles we watch and at the moment WE CAN'T RULE THAT OUT.   March 23rd has the potential to be an explosive day in markets.  Keep that in mind.


Gold Medium Term

Most evidence supports a major turn attempt to end the bear market is in process.  Gold has done the first thing correctly by bottoming at the Fib 50% retrace near 1050.  Now it has reached the 38% Fib retrace (1280-1322).   This is where we would get another confirmation that the lows are in.  From a momentum standpoint, that TRIPLE GREEN UPTREND LINE is where gold (above it) resumes is long term momentum.   In other words, it becomes key resistance if gold can conquer  1280-1322.


Bottom Line

Watch silver for gold clues, and consider buying some physical silver at the prices we discussed in the report. 


Technical Analysis :: Gold & Silver

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