Interesting charts of the day
Comment of the Day

May 14 2014

Commentary by David Fuller

Interesting charts of the day

Are the bears of precious metals right?

David Fuller's view

There have been some widely publicised bearish forecasts of precious metals in recent months.  They helped gold, silver and platinum to test previous support levels once again but they have not extended their declines.  Palladium has remained firmer.  Is this just a temporary pause before they head lower, or are the bearish forecasts from investment banks contrary indicators?  What do the charts suggest?  

Palladium has risen on supply concerns and the sustained breakout from the previous narrowing trading range is a very positive technical development.  There is also plenty of underlying support.  A break back beneath $700 would be necessary to reaffirm resistance neat the 2011 highs, but palladium was very overextended when they were reached.  That is not the case today.

Platinum was pushed under $1400 on numerous occasions since December 2011 but has not been able to maintain those declines.  This has opened the door to an upside test which I would expect while the reaction lows are still rising.  

Silver remains the weakest precious metal, meaning that it is also the most overextended and it is still holding near $19.  There is further underlying support from trading ranges which launched the dramatic upward acceleration commencing in 2010.  The longer silver can continue to hold near its current low, the more likely it will become that a significant upward spike will occur.  Firmness in gold would be a key indicator because silver is a high-beta proxy for the yellow metal.

Gold is rangebound in a potential support building process similar to what we see for industrial metals.  The longer it can continue to maintain approximately half of this year’s earlier rally, the more likely it will become that previous resistance near $1400 will be further challenged.  Meanwhile, the world continues to print paper currencies and central banks promise to fight deflation while reassuring us that they are seeking further inflation. :)

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