Gold got blown up in 2 days with respect to the short-term rally. Watch for gold to bottom before silver as we likely transition into a phase of gold leadership over silver. Key support is from the 1300 down to 1270.
While RSI is at a potential support point right here, silver looks like it can fall a lot farther, given this metal’s potential for violence in both directions. Support comes into play at 20.40 (SMA 200) but don’t be surprised if it’s got another buck in downside to the 19.50-19.75 zone.
HUI has support in the 220 to 225 range.
The weekly chart we have been following is roughly in line with that projection as the EMA 25 is at 228.
FNV and RGLD can bottom at their ‘3’ level supports, but they could decline to anywhere above point ‘4’ and remain in intermediate bull trends.
SLW eked out a higher high to the March high, which was a technical positive. It found resistance though at the high from last summer. There is support at 24 and more at 22.
PG.TO continues to flash 2.50 as a ‘buy’ opportunity on a quality explorer with a measured target near 4.
AAU never got going and so could have limited relative downside.
BTG’s buying opportunity looks like it is around 2.50.
TGD looks like it can get well down into the 1.40’s.
Bottom Line
Silver – and the hype surrounding it – tested my patience as it violently tried to refute our analysis that stated silver is in a downtrend vs. gold post-2011. Then the reversal happened in silver vs. gold, catching the ‘silver to da moon!’ crowd off balance.
If gold starts to lead silver, it can pressure the precious metals sector but it could also start the clock ticking on other markets. Though with Intel’s recent performance and the Semiconductors still on a 1999 style robo drive we’ll play the stock market a week at a time in the weekend report.
People seem to be jumping on a recent GDP revision as a reason to get bearish. They could be right, but more likely the firm employment and manufacturing data and performance by some large and key corporations trumps that. Gold needs signs of an economic contraction and/or systemic stress to be bullish on a fundamental level. As noted so many times before, tune out the Indian Wedding Season / China demand crap.
Assuming that falls into place, the worst cases on the above noted support levels would still keep the prospect of a bull market (not yet engaged as HUI held well below 261.36) alive. Below those is the ‘HUI 205’ parameter, which I would not like to see again as it would be the last ditch ‘stop loss’ on any potential bottoming scenario.
As it stands, the sector corrected right at the ‘Resistance #3’ per the weekly GDX chart we have been following. As noted since the rally began, one of those points was likely to usher in well, resistance (leading to correction). We have been prepared and we should remain patient in tuning out those who so desperately want us to be bullish to the point of putting rose colored glasses on the analysis.
The theme remains that it is deep summer and the market should not be a negative stimulant in our lives. Patience and a b/s detector (always divining to avoid bad analysis in search of the right combination of TA and sector/macro fundamentals) will see us through.
