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Yamada - Gold & Silver at Critical Points in This Cycle

With gold trading near the $1,600 level and silver below $28, today King World News is pleased to share a piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report. This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.

Metals: Gold & Silver

By Louise Yamada Technical Research Advisors, LLC ("LYA")

August 1 (King World News) - Gold: Upward Resolution!

Gold spot price succeeded in confounding both the short-term bulls and bears by stubbornly remaining essentially unchanged between 1,539 (support) and 1,641 (resistance) since May 2012. But the coil tightened as the configuration traced out a symmetrical triangle (see Figure 9) which may be resolved with a breakout.

Whether short covering is responsible, looking toward the Fed and possible QE3, or the “whatever it takes” talk, Gold popped to inch out through the top of the triangle. (A symmetrical triangle technically can resolve in either direction as long as it does so before reaching the apex, a sign of indecision. A breach of either boundary brings into play the next direction.)

With Gold lifting out of the triangle, a move through first resistance at 1,641 should be followed by a lift through 1,660-1670, both the 200-day MA and the downtrend. The measured move of the triangle itself (the size of the back of the triangle projected upward from the current point of lift) would measure to 1,673, into the levels just noted.

To technically support a sustained advance, Gold needs to penetrate 1,700 resistance; which would put in place a target at the next major resistance at 1,800, followed by a challenge of the 2011 closing high at 1,897. Supports are now 1,567 and the former 1,539.

Daily momentum is now positive, monthly momentum is still negative, but the weekly has improved this past week and could be on the verge of turning positive, which would support a renewed advance for Gold (none shown).

Gold versus Gold Stocks

The ratio between gold stocks and Gold the metal (see Figure 10) continues to depict the outperformance of the metal over the stocks (declining ratio line). Having shared this profile over the years, now note the new relative ratio low following the structural 20-year breakdown that occurred in 2008. The proliferation of the bullion ETFs allowed the public to hold the metal easily, and not have to be concerned with corporate earnings, nationalization of resources or environmental issues.

Silver: Still Consolidating but Improving.

Silver spot price has struggled near 27 support, trying to hold on between the uptrend and the declining 50-day MA. There is some minor strength coming into play, but not yet to the extent of Gold. Continue to monitor support at 27 (for risk toward 25). But a lift through 30 could initiate another advance. Here, as with Gold, momentum remains negative monthly, but turning up daily, with weekly poised to turn positive. A lift through 30 could carry toward next resistance at 35.

As Managing Director and Head of Technical Research for Smith Barney, Louise was a perennial leader in the Institutional Investor poll, and was the top-ranked market technician in 2001, 2002, 2003 and 2004, before going independent. To subscribe to Louise Yamada Technical Research Advisors, LLC ("LYA") CLICK HERE.

Eric King

KingWorldNews.com

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