Gold made a daily-scale bottom extension on Friday in one of the price series that we follow:
We have an outstanding ‘short sale’ recommendation in gold since compressions at both a daily and a weekly scale broke down recently and the price has only dropped $50 so this new signal has come unexpectedly quickly. This is our cue to advise covering outstanding shorts BUT it is important to note that there will probably be more weakness after this daily-scale signal has ‘worked off’.
In the longer-term picture, gold made a monthly-scale top extension 18 months ago that brought the rush of buying enthusiasm to an end. Since then it has traded in a range and we have caught a couple of the moves in this range. The monthly-scale top is now at the very limits of its ‘use by’ date and so we cannot rely on it too much as a bearish influence. This recent downward break of weekly-scale compressions should keep pressure on the price for another few months however, so we will look for a place to re-short it. If you are long-term by inclination, stay short with a protective ‘buy stop’ above these weekly compressions – a good move above $1690 would be the sign to abandon a bear view.
There has also been a monthly-scale compression in Silver, as shown. Any monthly signal is rare and this one shows that pressure is building for a new long-term move. We cannot tell which way, but if it turns out to be downward then this also will keep us bearish of both these precious metals.
The only nearby turn of any size in precious metals is due on the 18th March. We will know more when it arrives but (as ever) the trend that is current when that date arrives will end thereabouts and probably reverse. A lot can happen in a month, so keep a close eye on gold and silver, even if you only watch them for clues to other markets.