While both Gold and the Euro rallied from the bullish hourly chart, and right on cue with our calls last week, it would appear that in the case of both of these markets, and especially Gold, the jury is still out in terms of how positive we should be. In fact, the real conundrum here is whether the spike of around $50 seen this last week is the best we are going to be treated to near term? There is nothing more bearish for a stock or market than a failed attempt at snapping the downtrend.
This point is illustrated by the break of the bull flag at $1,298 in which Gold managed not only to hit its 50 day moving average then at $1,333, but also to push higher towards a peak of $1,348 – $10 above the former May floor and $27 above the low in April. All it has to do is hold back above one of these levels on a weekly close basis to provide a strong recovery signal. The jury is out thus far… There is a last bullish scenario here that we shall decline towards the last July resistance at $1,300 on the way up and then rebound back to $1,348 – as I write, this seems to be playing out actually.
Of course, it usually helps to get a sense of perspective on what Gold is doing by also looking at Silver as well. Here it can be seen on the daily chart, that there is a descending price channel from 2011 still very much ruling the roost. The only slight complication on this is that there has notionally been a bounce off a red support line within the channel running through $18 and hit at the end of June. However, the difference between Gold and Silver is that while Gold hit, and slightly exceeded its 50 day moving average, Silver bounced that much less and was unable to clear this charting feature.
Indeed, the message to me here is still that at least while there is no end of day close back above the 50 day line that Silver is a sell into strength candidate of a classic variety with little reason for us to say anything other than the 2 year support line is heading as low as $15 on a 3-6 month timescale. Indeed, the risk is more biased towards an acceleration to the downside / selling climax, than an improvement. Clearly, such an influence is not helpful to sister metals such as Gold.