UPDATES on GOLD and SILVER (7:30 pm EDT)
We currently have a tricky trading situation in gold and silver. Both metals may be starting a steep fall to the bottom of a longer-term cycle, but we are about to enter a reversal zone for precious metals that could interfere with this correction down, at least temporarily.
Gold is very late in its current medium-term cycle, and the final bottom to this cycle is due anytime through the end of October. This bottom will also occur simultaneously with a longer-term 50 week cycle, which is now overdue. Because we have a 50 week cycle bottom, prices could go down into the $2300 - $2400 range. I am tempted to sell short now for this substantial drop, but today prices are making an isolated low inside a strong potential "pivot point" for gold (Monday and Tuesday). Furthermore, we enter a new reversal zone specifically for the precious metals this Wednesday (Oct. 2 -10). It's very possible gold could bounce back up today or tomorrow and make a new high inside the new reversal zone this week or next. Gold prices are currently very bullish, and the upper range of a projected top to the current medium-term and 50-week cycle is close to $2800 (prices got close to $2700 last week). Further supporting the idea of a bounce is the fact that prices are approaching the 15-day moving average which might offer support. If we don't get a bounce and prices continue to fall, we will wait for the final bottom to these cycles and look to buy.
Compared to gold, silver's current medium-term cycle is relatively young (it started with the low of $26.52 on Aug. 8). As with gold, the end of this cycle will likely correspond to the end of a longer-term cycle - in this case a 4.3 year cycle. The bottom of the 4.3 year cycle is now overdue. There's a small possibility the bottom already happened with the Aug. 8 low, but $26.52 is a bit too high for the 4.3 year bottom. The target range for that bottom would be $23 - $25. That is a substantial drop from current prices (around $31) and worth selling short. But as we noted above, we enter a reversal zone for both precious metals this Wednesday. Silver has been falling sharply from last week's high at $32.65. If it falls into this new reversal zone, we could see prices reverse back up. So how should we play this situation?
Silver's medium-term cycle is due for a mid-point sub-cycle correction, which is most likely in progress now. I am going to wait and see how far this correction goes. If it finds support quickly in the new reversal zone (perhaps near the 15-day or 45-day moving averages), the cycle could stay bullish and may push to new highs before finally falling to its medium-term and 4.3 year cycle bottom(s). On the other hand, if the current correction continues into next week and goes deeper and breaks bellow $27, the trend would be turning bearish and we might look to sell short the top of any rebound or perhaps just wait for the final bottom to buy, probably by the end of October or early November.
We should note here that the U.S. Dollar Index seems to be leveling off just above 100 after a long descent from its April high around 106. If the greenback starts to rally from this possible baseline support, it could send gold and silver prices down. We will watch this carefully.
For now, we are on the sidelines of both gold and silver..
We currently have a tricky trading situation in gold and silver. Both metals may be starting a steep fall to the bottom of a longer-term cycle, but we are about to enter a reversal zone for precious metals that could interfere with this correction down, at least temporarily.
Gold is very late in its current medium-term cycle, and the final bottom to this cycle is due anytime through the end of October. This bottom will also occur simultaneously with a longer-term 50 week cycle, which is now overdue. Because we have a 50 week cycle bottom, prices could go down into the $2300 - $2400 range. I am tempted to sell short now for this substantial drop, but today prices are making an isolated low inside a strong potential "pivot point" for gold (Monday and Tuesday). Furthermore, we enter a new reversal zone specifically for the precious metals this Wednesday (Oct. 2 -10). It's very possible gold could bounce back up today or tomorrow and make a new high inside the new reversal zone this week or next. Gold prices are currently very bullish, and the upper range of a projected top to the current medium-term and 50-week cycle is close to $2800 (prices got close to $2700 last week). Further supporting the idea of a bounce is the fact that prices are approaching the 15-day moving average which might offer support. If we don't get a bounce and prices continue to fall, we will wait for the final bottom to these cycles and look to buy.
Compared to gold, silver's current medium-term cycle is relatively young (it started with the low of $26.52 on Aug. 8). As with gold, the end of this cycle will likely correspond to the end of a longer-term cycle - in this case a 4.3 year cycle. The bottom of the 4.3 year cycle is now overdue. There's a small possibility the bottom already happened with the Aug. 8 low, but $26.52 is a bit too high for the 4.3 year bottom. The target range for that bottom would be $23 - $25. That is a substantial drop from current prices (around $31) and worth selling short. But as we noted above, we enter a reversal zone for both precious metals this Wednesday. Silver has been falling sharply from last week's high at $32.65. If it falls into this new reversal zone, we could see prices reverse back up. So how should we play this situation?
Silver's medium-term cycle is due for a mid-point sub-cycle correction, which is most likely in progress now. I am going to wait and see how far this correction goes. If it finds support quickly in the new reversal zone (perhaps near the 15-day or 45-day moving averages), the cycle could stay bullish and may push to new highs before finally falling to its medium-term and 4.3 year cycle bottom(s). On the other hand, if the current correction continues into next week and goes deeper and breaks bellow $27, the trend would be turning bearish and we might look to sell short the top of any rebound or perhaps just wait for the final bottom to buy, probably by the end of October or early November.
We should note here that the U.S. Dollar Index seems to be leveling off just above 100 after a long descent from its April high around 106. If the greenback starts to rally from this possible baseline support, it could send gold and silver prices down. We will watch this carefully.
For now, we are on the sidelines of both gold and silver..
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