Zak Mir on the (Not So) Precious Metals..?

What can be said about one of the biggest conundrums in the financial markets at the moment – will mining stocks stage a lasting recovery – is that those looking to solve the riddle have certainly been kept on their toes in recent months… 

On the fundamental side it would seem that with tapering speculation increasing and hence the U.S. Dollar having hit 4 month highs this week, there is little reason to expect precious metals to get a boost from a weakening greenback. In fact, quite the opposite state of affairs would appear to be the case. Therefore the buy argument on the likes of Gold, Silver and Platinum, as well as the stocks in this asset class, still has to rely on the assumption that after 3 years of declines that we are now looking at markets which have factored in the worst. To me the jury is out on this one still 

Gold 

As far as the daily chart of Gold is concerned, it really did seem that 2014 was set up to begin with a decent rally, something which is said on the basis of the month end final bear trap rebound for December at $1,182.7. This trap did deliver upside, but so far it has not even been enough to sustain $1,250 on a consistent basis or even a break of the primary downtrend line from August. In fact, it would appear that we are looking at not only a trend line failure today, but also former support from October at $1,251 now becoming resistance. The expectation after the latest failure is that at least while there is no end of day close back above the August trend line level of $1,261 that we could see a renewed downtick. The favoured area for such a test would be back down to the 20 day moving average at $1,229, a destination which could be visited in the next few days. With continuing tapering worries doing the rounds this is clearly a dampener on the price action.

Silver 

Moving onto Silver and it can be seen how the daily chart appears to be very similar in structure to Gold with this precious metal also failing at an August resistance line.

In this instance we are looking at the line from the summer running at $20.35, and with the problem as far as the bulls are concerned being the way that there has been four attempts to clear the resistance zone just above $20 without success. This would suggest that it really would be best to wait on an end of day close back above $20.35 before going lone, or even as much as weekly close through this area. The danger is that unless we see a clean break to snap the recent downtrend there could be a retracement back towards not only the sub $19 support zone from December, but also as low as the 2013 descending price channel from August under $18 as soon as the next 1-2 months.

Platinum 

Given the relative gloom of the present technical positions on Gold and Silver, it comes as something of a refreshing surprise to be looking at the daily chart of front month Platinum. In contrast here, we appear to have the down trend break so lacking in the charts of the other precious metals, and it comes in the form of a push above the 200 day moving average now at $1,427. The fact that the break has been delivered by a V shaped bull flag and comes in the wake of a clear December bear trap reversal from below $1,350 also adds to the credibility of the latest rally. The expectation now is that while there is no end of day close back below the 200 day line the upside here could be back towards the main post August resistance at $1,550 plus over the next 6-8 weeks.

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