April 27th gold and silver update

Yesterday was a big day for gold, not so much for silver.  While silver many times gets its cues from gold, it also responds to an industrial influence.  Risk was generally out in a big way with the Greece crisis approaching end game.  So with de-leveraging comes the notion that global business will suffer, resulting in the commodity complex selling off.  Gold is a commodity, why was it up in a big way yesterday.  Simple question, simple answer: gold is now functioning more as money than as a commodity.  When fear enters the market money will flow to where it is treated to the least risk.  The market is speaking loud and clear, change is happening.  The dollar has always been the go to money for safety.  It seems there is a competitor for the function the dollar has provided.  Funny, gold has served that purpose for over 3000 years, yet it is perceived by the public as the upstart challenging the "King Dollar!"  Amusing.

GLD finally closed above critical resistance of 114.13.  You can bet the  bullion banks will be gunning hard today to blow the price back down.  They know quite well technicians the world over are watching and the algorithms are humming away and ready to pounce on a technical buy signal such as we saw yesterday.  Price closed essentially on the high of the day for the 2nd time in 3 days.  This time there was good volume confirming the big candlestick.  Moving averages are in the preferred bullish configuration, all below current price and in order from shortest to longest duration.

GLD - Daily Candlesticks: "

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The 6 month chart shows nothing left for price resistance, other than the Bollinger band, between yesterday's price and the all time high of 119.69.  I would not be surprised to see the bullion banks pull all stops and try to hammer price back under 114.0.  They do not want gold at all time highs as Greece and Portugal burn to the ground.

SLV has had the better chart until very recent.  It is taking a pause and still has some overhead resistance remaining at 18.70.  Volume was very good yesterday, but the price closed well off the high and low of the day, indicative of indecision.  Moving averages are all in bullish alignment under price providing support, in order from shortest to longest duration.

3 Mo: "

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The 6 month chart shows additional resistance at 18.17 and 18.50.  Then it is clear all the way up to the all time high of 19.0, with only the Bollinger band providing resistance.

6 Mo: "

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GDX, the proxy for the HUI index of unhedged miners, had a decent day but as with SLV responded to the downward pressure of the general global stock market.  This has unfortunately been the case for the miners evr since the meltdown of 2008.  The miners have correlated more with the overall stock market and consequently have underperformed both gold and its own traditional performance within a gold bull market.  This will likely change when the public catches gold fever, because people are familiar with stocks, stocks, and more stocks.  They will see this as the most logical and  convenient way to gain exposure.  I wish I knew when this will occur, but until then I will continue to favor the option play on the metal etfs in order to gain the traditional 3:1 leverage that the stocks have offered in the past.

The 3 month chart shows 49.11 remaining as resistance from the previous high.  The moving averages are almost in preferred alignment, with the 50 day MA quickly advancing to replace the 100 day MA in the order.  Then the most bullish configuration will be present, all MAs below price providing support, in order from shortest to longest duration.  Volume was good yesterday.

3 Mo: "

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The 6 month chart shows more overhead resistance at 51.16 and is the next price target if progress continues to the upside.  As can be seen here, GDX is still some distance from the all time high of 55.32 and illustrates the degree as to how much stocks are under performing.  Price has been gravitating to the Fibonacci 38.2% and 62.8% retracement lines.  The resistance of the previous high is sitting right on the 62.8% line.   

6 mo: "

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The next 2 charts show the under performance clearly.  The chart show the ration of GDX to gold, or GDX divided by the spot price of gold.  A price trending upward shows out performance of GDX, or the mining stocks, relative to gold.  A downward trending price shows under performance.  The 1 year chart shows GDX out performing gold since February, but it still remains within the larger overall downtrend from September 2009.  It is on the verge of breaking out and should be watched for confirmation.

GDX:$Gold One Yr: "

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The 3 year weekly chart is an eye opener!  The carnage was complete in the fall of 2008 and GDX has lagged gold ever since.  This has discouraged many a gold bug, including yours truly!  When faced with the absolute certainty of this chart and what it says, one has to make a choice.  Continue to do things as you have always done and insist on rationality to return to the markets, or face the issue and change tactics.  I chose to change tactics and now rely predominately on options to gain my leverage.  With that said, I will be monitoring these ratio charts to tell me when stocks will again be a viable vehicle for me to utilize.

GDX:$GOLD - Three Yr: "

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