The theme is that the pullbacks and/or corrections, will come. The terror attack in Brussels may have been the flashpoint for such a pullback. As noted in a public post, gold’s rise on the fear or ‘safe haven’ bid (I shorted it) is not a good thing for the gold price beyond the flashpoint. The only terrorism that matters for gold is Central Banking terror committed upon currencies and financial systems.
The gold and silver CoT have been ripe, gold has lost momentum, HUI is at or around a 3 year downtrend channel top and silver has been a non-starter nominally, and in relation to gold. In the event that a pullback becomes an actual healthy correction, I would like to be clear on the key support levels again.
Failing that, it looks like the sector will at least get one of those flash pullbacks it has experienced on the way up. I would be more cautious about buying this one due to the CoT, HUI’s channel limit and the fact that gold rose yesterday on the terror bid. One interpretation could be that the very last unhealthy holder came on yesterday.
For HUI key support is clearly around the weekly EMA 55, which includes the October high at 140. A pullback would find support at a small shelf around 160. But real firm ‘correction’ support is around 140.
Gold’s favored support continues to be at or around the weekly EMA 75 (currently 1183).
Here is the alternate weekly chart that dials the view in closer. In this sector, volatility often goes further than you might think it would when looking through the calm of foresight. So we have added a view of support at the 62% Fib retrace area in the 1130’s.
As for silver, we noted that it has crept above its weekly EMA 55. This morning’s pre-market weakness still keeps it above that level. So let’s not go whole hog bear here. Let’s let things unfold step by step. Step 1 for the correction – as opposed to pullback – view is for silver to lose the EMA 55 at around 15.50.
Finally, whatever this is, it would be great if the HUI-Gold ratio could maintain its breakout above the channel line and lateral resistance. That is the type of thing that would be a big aid in buying a correction.
As a final note, gold has been consolidating in a bullish manner (by flagging) vs. broad stock markets for several weeks now. Stock markets need to begin a pullback soon and keep the bullish consolidation scenario going. A loss of the bull stance vs. US and global stocks would force a reevaluation of the current macro theme. So far, it is intact. But gold needs to resolve bullish from this consolidation vs. stock markets for the macro theme to remain as is.
