As we enter the first week of September and the center of a timing window for a likely gold and silver trend reversal, we find these metals rising sharply. This is suggesting a reversal down from a top rather than up from a bottom (although we could get both if gold falls steeply now and forms a bottom sometime next week). Some analysts see gold and silver prices forming a base over the last two weeks from which a major rally and breakout will occur. This is possible, but gold will first have to break through a resistance barrier at $1300 -$1310 to confirm this idea. There have been some strong bullish signals appearing in silver charts over the last few days lending support to the idea of precious metals taking off now. The alternate scenario is for gold to move down to a low by the end of next week. If this happens, it could be an ideal buy spot as there is the possibility of a strong rally in the precious metals in the second week of September. Directional momentum is mixed bullish and bearish in gold and silver charts but the gold and silver mining company stock indices HUI and XAU are now 100% bullish. The U.S. Dollar Index is showing no signs of backing off from its recent bullish surge and momentum in its chart remains 100% bullish. As the dollar's movement is usually inversely related to the direction of precious metals, this is bearish for gold and silver. My purpose for stating the conflicting data here is not to confuse the reader but to point out the ambiguous signals in this market right now and the logic in remaining on the sidelines for the moment. As I mentioned in the last gold blog, I am trading these metals short-term until I am more confident that the long-term cycle bottoms in gold and silver have been established. Once those bottoms are in, we will be more comfortable with long positions in both metals.
On the sidelines of gold and silver for now but on the alert for significant short-term trades (buying and short selling) over the next several weeks.
We are getting a fairly strong rally in crude oil prices from an August 21 bottom just above $92, and today prices surged into an area of resistance at $96. This could be a good setup for a short sell, but some short-term technical signals are suggesting the rally could go higher. I will analyze crude charts in more detail over the weekend to determine whether or not to go short in this market sometime early next week. If the broad stock market starts to fall,
crude oil could go with it as these two markets often move hand in hand. Still out of this market.