Gold and Silver: A Market Perspective For Investors

Gold and Silver: A Market Perspective For Investors
Written by:
Georgi Milenkov
12th October 2016

                Precious metals got hit hard last week, with their biggest drops in over three years. Some investors are asking if the bull run is over already, ignoring that despite the drops last week, Gold and Silver are still up 18% and 27% respectively for the year. Perspective is difficult to maintain when you let emotions get the better of you.

I want to reiterate what I have said in a prior silver update several weeks ago, as I still stand behind my perspective:

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“A potential drop lower will likely see silver hold onto the trend lines established since August, at worst hold the lower end of the long-term support in the $18.00 – $18.50 region. A break below those supports will leave the December to current trend-line [black line] as target for buyers.

 

Charts – Daily

                On a daily chart of silver, it can be seen that prices have just hit the boundary of the upward trendline [black line], which happens to coincide with the 200 DMA [purple line]. Being such a significant technical level, a bounce was highly likely.

Silver

Note: The 200 DMA is currently rising, which distinguishes this pullback from similar selloffs seen during the 2011-2015 bear market. It is quite normal for a new bull market to revisit (and even briefly undercut) its 200 DMA from time to time, especially after it has spike to levels far above. A similar observation can be seen in Gold as well.

Gold

                As for near term expectations in Gold and Silver, the markets provided us with a drop that I believe is the last phase of this correction. It could come lower in the next week or two, but at this stage I believe the market is indicating that buyers have entered the market and this is likely to continue moving forward, reducing the likelihood of a further correction so current prices in my opinion should be bought.

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