It has been a bumpy ride for precious metals investors over the past couple of years, and unfortunately I don't think it’s over just yet.
The good news is that the bottom has likely been put in for gold, silver, and gold miners, however the recent rally in these metals and miners looks to be coming to an end. While we could see another pop in price over the next week or so, the price, volume, and momentum seem to be stalling.
What does this mean? It means we should expect short-term weakness and lower prices over the next month or two.
Below are several charts; the forecasts were based on simple technical analysis using cycles, Fibonacci, and price patterns. As you can see, we are not trading at my key pivot level; I expect selling pressure to start to increase and eventually overpower the buyers send prices lower.
Gold Trading Weekly Chart
When viewing the weekly chart, you can see that gold is technically in a bear market. If you were to pull up a daily chart, you would likely notice how the price of gold is trading at a key resistance level and has reached its full flag measured move.
This means the odds are pointing to lower prices for gold in the next few weeks. Keep in mind, however, that I do feel as though a major bottom has been put in place for the precious metals sector, so buyers are likely to step back in around the $1,300 area.
Silver Trading Weekly Chart
Silver's chart looks a little bit different, but the same analysis that applies to gold applies here.
Gold Miners Trading Monthly Chart
Gold miners may have bottomed on this monthly investing time frame chart but the daily chart (which you will see next) clearly shows short-term weakness has started.
Gold Miners Trading Daily Chart
This daily chart really shows my thinking for miners and the overall precious metals sector as a whole. The recent weakness in gold miners to the downside points to distribution of shares. This is very negative for the price of physical gold and silver as gold mining stocks tend to lead physical metals.
The yellow box shows a possible major stage-one basing pattern forming. If this is the case, then we will have a great opportunity in the coming months when the precious metals downtrend completes a reversal and starts heading higher.
In short, I think that staying in cash or shorting metals is the play for the next couple weeks. After that, anything can happen. And until price breaks down or finally completes the basing pattern and confirms a market bottom, I would be very cautious trading here.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
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