The main purpose of this update is to alert traders to the "golden opportunity" that is setting up in the precious metals right now. Regular readers of this blog know that I have been watching the gold and silver markets over the last three weeks for an opportunity to go long but have been hesitating because of ambiguous technical signals. Last week saw the appearance of several important bullish signals and signs in the charts of these metals, so it looks like we are now at a good juncture to go long again in gold and silver. Here are some major points to consider:
***Last week directional momentum in silver turned 100% bullish and gold shifted from 100% bearish to mixed bullish and bearish. These were both major shifts indicating an immediate underlying bullishness in the precious metals.
***Also last week the charts of the two major gold and silver mining company stock indices (HUI and XAU) showed major shifts in a bullish direction, and several gold mining ETFs flashed significant bullish signals. As I've mentioned before on the site, gold mining stocks often lead the price of gold itself, so this is more evidence of a bullish trend developing.
***Blog readers who are familiar with technical analysis may have recognized a major inverted head and shoulders pattern that has been developing in the price chart of gold since May and is approaching completion now as prices approach the neckline resistance a little above $1400. A clear break through that line would be very bullish for gold.
***We are now starting new medium-term cycles in both gold and silver which is at least short-term bullish. We may have already started the long-term cycles in these metals, but we still need more time to confirm this. (There is still the possibility of gold and silver breaking below their June lows and forming a final low over the next several months, but this is seeming less likely now, at least in the short-term, as the short and medium-term picture is turning bullish).
***In recent blogs I've mentioned the likely manipulation of gold prices this month by some major banks selling large amounts of gold (800,000 ounces at a time) on COMEX to keep the price of gold down. I got this information from internet financial blogs, and I think the wide exposure of this alleged manipulation on the web could act now to push prices up as investors realize this was done to contain an underlying bullishness in the market. The alleged manipulators (who did these transactions in clandestine fashion on overnight markets) may also be reluctant to do it again (at least for awhile) since they have been so exposed.
I am tempted to issue a gold/silver buy alert tonight, but both metals are short-term overbought and approaching areas of resistance, so I am going to wait and see if they back off a bit for a better entry point (which could be as soon as tomorrow).