Originally published on Dec. 8, 2020 by TraderStef at CrushTheStreet
The price action in gold and silver is making some upward progress as we approach the holiday seasonality pattern, but they are not yet out of the woods or breaking out. In my recent analyses, I suggested that the metals would get a boost as soon as Capitol Hill finalizes a CARES Act II ‘stimulus’ bill to keep the economy afloat due to the pandemic’s second wave taking its toll.
“People are coming to the realization that we are still in a tough place with the virus and the economy isn’t as strong as it was in the early part of the summer, while we are still waiting on stimulus.” – Reuters, Dec. 8
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There are a plethora of news-driven variables and recent fundamental factors to consider, but I will focus solely on technicals this evening and add a few charts on the current global negative interest rates (NIRP) situation. Gold and real interest rates are a happy couple.
Why Gold and Why Now… “Ray Dalio computed the annual returns in real terms, which is done by subtracting inflation from interest rates… The sovereign bond market is in a bubble. One sign of the bubble is that debt obligations of many developed nations have a negative interest rate. This reflects these securities are strongly overvalued. Another sign is that the world has never been this much in debt. World debt to GDP is currently well over 330%.” – The Gold Observer, Jun. 24
Global negative sovereign debt levels at record highs…
Global negative sovereign debt spreads…
Let’s move onto a brief overview of the price action in gold and silver since publishing “Silver Rodeo Riders Anticipate a Mint Reset Rally” (Twitter thread) on Oct. 11, “Patience and Diligence – Gold Technical Analysis” (Twitter thread) on Nov. 22, and “A Few Dollars More Before the Fall – USD Technical Analysis” (Twitter thread) on Nov. 25. The dollar breached important supports before closing at 91.96 on Nov. 25, and yesterday’s closing price chimed in at 90.47. To view a larger version of any chart below, right-click on it and choose your “view image” option.
“Technicians often ask fundamentalists… ‘Do you want to be intellectually correct or do you want to make money?’” – @RealMoney
The Next Gold Rush Is Here… “You have been warned. The Biden – Yellen (BY) dream team will fulfil our worst fears of deficit spending, debt explosion and dollar collapse.” – Egon von Greyerz, Dec. 2
Gold Spot weekly chart as of Dec. 8, 2020, at 5 pm EST…
Gold Spot daily chart as of Dec. 8, 2020, at 5 pm EST…
Excerpt from the Nov. 22 daily chart analysis:
“In order for the price action to regain its upside momentum it must decisively retake the overhead 50 EMA and rally beyond $1,980 to challenge the 23.6% Fibonacci Extension and the Aug. $2,074 high. The gold chart remains in a bull market long-term and I am neutral near-term until the holiday season draws near, but always stay alert for sweet spot scalping opportunities.”
After an extended period of chop and consolidation since the Aug. $2,074 high, the odds are high that gold printed a bottom at $1,764 on Nov. 29. Today’s 5 pm close was $1,870. The dominant pattern since August was a Falling Wedge and it morphed into a Half Staff Flag at the Nov. 29 pivot. The gap between the Flag’s and Falling Wedge’s lower trendline was a $50 Bear Trap. Take note of the 50 Exponential Average (EMA) position on both charts, which acted as support for last week’s candlestick at the $1,764 pivot and today’s resistance when the daily candlestick tapped it from below. There is a confluence of three technical supports at the $1,764 low that include the Up Channel‘s lower trendline, the 50 EMA on the weekly, and a lateral (not drawn) where a neckline breakout from an Inverse Head ‘n Shoulders pattern resulted in several days of heavy buy volume.
If the price action can sustain upward momentum through the $1,880 overhead lateral, the previous all-time high of $1,920 and the Flag’s topside trendline will be an easy target without much resistance. If that scenario plays out, a retest of $1,980 can arrive quickly. The buy volume is solid on both charts but not remarkable, the StochRSI is stoked with room for more gains, but the DMI-ADX has not yet reversed into a power-uptrend pattern. The chart is ripe for intraday scalps, with caution until $1,980 is taken out decisively.
Silver Spot weekly chart as of Dec. 8, 2020, at 5 pm EST…
Silver Spot daily chart as of Dec. 8, 2020, at 5 pm EST…
Excerpt from the Oct. 11 daily chart analysis:
“The DMI-ADX has not yet formed a preferred (bullish) Alligator Tongue.”
The price action in silver remains sticky between $22 and $27, which are average price points from two sets of Fibonacci confluence. Aside from that, the gold and silver charts may appear similar at first glance, but there is one stark difference: the price of silver is already testing the topside trendline of a Flag pattern drawn back to its Aug. $30 high. That is all that I can say about the silver chart. It will follow gold’s lead in spades. Stay alert.
2021 Predictions… “2021 brings the usual suspects that power silver higher on its hard asset/precious metal side as the US dollar weakens, and as investors are faced with the harsh reality of no relief in sight from negative real interest rates… Silver will spring a surprise in 2021, as demand for solar panels sends prices soaring to $50/oz.” – Saxo Bank Group, Dec. 2020
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